Microsoft and Yahoo! extend Search Alliance, with changes

Last month Microsoft and Yahoo put an extension of their 10 year Search Alliance agreement on hold, after a 5 year milestone allowed Yahoo to potentially back out of the agreement if certain criteria weren’t reached (they weren’t).  Yahoo, which had gutted most of their search engineering team after the initial agreement under then CEO Carol Bartz, was in no position to try to compete in search on their own, but did hold some leverage in renegotiating the agreement.

Today Yahoo has announced that they have indeed done just that, extended the agreement while gaining concessions that allow Yahoo to innovate in mobile search, a focus for new CEO Marissa Mayer, and making some changes in the way that Microsoft’s and Yahoo’s ad sales teams can sell ads on the platforms.

The deal keeps in place Microsoft’s serving of search results on most desktop searches via Yahoo properties, but now Mayer will be able to move into mobile search, a focus for Yahoo under her tender.  In a Tumbler post she posted along with the official announcement this morning, Mayer said:

We firmly believe that search is still in its infancy – and this partnership marks the next chapter in our exploration of how to make search truly great. I want to thank Satya Nadella and his team for working closely with us over the past few months to rejuvenate our partnership. Search has, and will continue to be, an incredibly important part of Yahoo, and this new partnership represents a major step forward in our renaissance.

 In addition to the mobile changes, the newly revised agreement will separate the sales forces for the two platforms, as described in the press release:

Second, the update increases agility and sales focus. Microsoft will become the exclusive salesforce for ads delivered by Microsoft’s Bing Ads platform, while Yahoo will continue to be the exclusive salesforce for Yahoo’s Gemini ads platform. Integrating the sales teams with those responsible for engineering will allow both companies to service advertisers more effectively. Microsoft and Yahoo plan to begin to transition managed advertiser sales responsibilities this summer.

While there wasn’t much doubt that the two companies would come to some kind of agreement, as Yahoo is in no position to go it alone and would face significant regulatory challenges in making a move to Google, the agreement solidifies the relationship for the next five years, at least, keeps Microsoft and Bing with an enlarged user base, and now gives Yahoo some room to innovate in mobile search.