Yahoo Extends Deal with Microsoft; Announces Improvements and New Tools to Challenge Google

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Filed Under Search Engine News

As Google continues to strengthen its chokehold on the U.S. search market and keep the competition at bay, the industry's best minds struggle to develop new tools and strategies to cope with Google's dominance and find a way to breakthrough and regain a foothold in an industry that has long been controlled by Google. As Yahoo's Marissa Mayer approaches one year on the job as CEO, she is looking to revamp Yahoo's approach and breathe new life into the competition for number one in the search industry.

It was announced last week that Mayer and Yahoo! are in the process of developing several new tools and strategies to try and revive Yahoo's prospects of regaining market share in the lucrative search ad industry. As of 2012 the industry brought in roughly $19.8 billion in revenue related to search advertising. As of the end of the first quarter of 2013, Google held 67% of the search engine marketplace in the U.S., bringing with it a sizable chunk of that $19.8 billion pie.

In a recent interview with Bloomberg News, Yahoo's senior Vice President of search expressed excitement at Mayer's plans to get Yahoo moving in the right direction in 2013. Laurie Mann, the VP of search since February, has worked at Yahoo for the past 10 years and sits down with Mayer on a daily basis. Mann told Bloomberg News that there are several exciting projects in the pipeline at Yahoo designed to increase its competitive advantage against Google.

During the interview, Mann unveiled that the projects from Yahoo include improvements on search with their partners at Microsoft as well as technologies that will be unique to Yahoo. As expected, there will also be an increasing emphasis on mobile search and related technologies. Mann described a desire on the part of Mayer to get search “right” for those using the Yahoo!/Microsoft network. While details were not made available by Mann at this point in time, he eluded to a general focus on creating new ways for users to access their search results and improve access to search related advertisements and tools on the Bing search engine from its partner at Microsoft. In addition to these changes, Yahoo plans to increase and enhance the performance of searches done on smartphones and tablets.

In recent months, onlookers have questioned the strength of the Yahoo/Microsoft partnership and how much it was really helping either company in chipping away at Google’s industry lead. The partnership between Yahoo and Microsoft was completed back in 2009 by then Yahoo CEO Carol Bartz, but the partnership has brought little to Yahoo in terms of increased competition with Google. As a part of the deal, Yahoo relinquished control of search technologies to Microsoft’s Bing search engine in return for revenue-per-search (RPS) payments. The partnership between the two companies hasn’t yielded the results either side expected.

As of the end of the first quarter of 2012, Google’s search market share was 67% compared to 17% for Bing and just 12% for Yahoo. Even worse for Yahoo, its share of the market continues to shrink. At the end of 2012, Yahoo held a 14% share and shrinking. That trend has clearly carried over into Q1 2013 as its 12% share shows. Adding to the misery at Yahoo, and the challenge for Mayer and Mann, is the fact that the Bing search engine has failed to deliver on promised RPS returns throughout the course of the partnership. Over the past few weeks, Mayer attempted to negotiate an end to the deal with Microsoft, but as reported by numerous outlets such as, her attempts were unsuccessful. Last week Mayer agreed to an extension on the RPS payments with Microsoft that included guaranteed returns to Yahoo through 1 April 2014. The current deal expired on 1 April 2013, offering Yahoo a chance to negotiate an exit from the partnership but as mentioned, Mayer was unsuccessful.

With the Yahoo/Microsoft partnership set to last through at least April 2014 (the full deal ends in 2015 when either side can walk away from the partnership), Mann is set to continue meetings with former Yahoo colleague, and current Microsoft employee, Qi Lu. Mann and Lu previously worked together at Yahoo, and Lu now heads up Microsoft’s online services. The two will continue meeting in an effort to develop better strategies the partners can use to try and topple Google.

Mayer is considered one of the brightest minds in the search industry and she’ll need all her skills at the ready in order to bring Yahoo back to relevance and topple a giant she created. Before joining Yahoo as the CEO in July 2012, Mayer worked for Google and helped build the company into the search giant it has become today. When Mayer parted ways with Google for the Yahoo position, Google controlled 73% of the market in the U.S. and had access to the massive search-ad revenue that came with that large share. Mayer certainly possesses the know how to get Yahoo back in the game, achieving her lofty goals will be difficult. Under the partnership with Microsoft, any of these planned improvements to search tools and search-based ads will be rolled out on the Bing network. While the return on that investment for Yahoo directly might be small, its determination to offer new and easier user interfaces for mobile search platforms is clearly the right move.

About the author
Federico Einhorn
Federico Einhorn
I'm the Founder and CEO at FullTraffic. Since 2005, FullTraffic has evolved to become one of the most important Traffic providers world wide for small to medium sized businesses. - Read more stories from .
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