Microsoft watches Yahoo add Google to its search ads in new agreement

Ever since Marissa Mayer took over as CEO of Yahoo, the company has been looking for more wiggle room in its search deal with Microsoft. When the search agreement between Yahoo and Microsoft was first inked, the two companies relied heavily on each other to compete in the market. Since the original deal, the conditions that gave birth to a Microsoft and Yahoo partnership have since shifted and Yahoo is looking to adjust accordingly.
According to an SEC filing from Yahoo, the company has signed a non-exclusive deal with Google providing search ads for Yahoo’s search results. The new deal has Google providing search ads while also paying Yahoo a percentage of the revenue return from the ads as well.

On October 19, 2015, Yahoo! Inc., a Delaware corporation (“Yahoo”), and Google Inc., a Delaware corporation (“Google”), entered into a Google Services Agreement (the “Services Agreement”). The Services Agreement is effective as of October 1, 2015, and expires on December 31, 2018. Pursuant to the Services Agreement, Google will provide Yahoo with search advertisements through Google’s AdSense for Search service (“AFS”), web algorithmic search services through Google’s Websearch Service, and image search services. The results provided by Google for these services will be available to Yahoo for display on both desktop and mobile platforms. Yahoo may use Google’s services on Yahoo’s owned and operated properties (“Yahoo Properties”) and on certain syndication partner properties (“Affiliate Sites”) in the United States (U.S.), Canada, Hong Kong, Taiwan, Singapore, Thailand, Vietnam, Philippines, Indonesia, Malaysia, India, Middle East, Africa, Mexico, Argentina, Brazil, Colombia, Chile, Venezuela, Peru, Australia and New Zealand.
“Under the Services Agreement, Yahoo has discretion to select which search queries to send to Google and is not obligated to send any minimum number of search queries. The Services Agreement is non-exclusive and expressly permits Yahoo to use any other search advertising services, including its own service, the services of Microsoft Corporation or other third parties.”

Under the recently renegotiated agreement between Yahoo and Microsoft, Yahoo was free to work with other search-ad providers as early as the beginning of this month. It should come as no surprise that a struggling Yahoo chose the world’s leading search engine provider to partner up with, as well as adding Google’s lucrative search dollars to its pockets. As for the logistics of the deal, Google and Yahoo both agreed to several US Department of Justice provisions that seemingly cover much of the opposition a similar 2008 antitrust investigation negated.
What this means for the future relationship of Yahoo and Microsoft is yet to be determined. According to Mary Jo Foley of ZDnet, who reached out to a Microsoft spokesperson, it appears to be business as usual for the two companies.

We remain committed to the Yahoo syndication partnership and will continue to serve the majority of Yahoo traffic as outlined in our contract extension. Yahoo is a valued partner and we look forward to continuing to serve our advertising customers through the Bing Ads marketplace.”

As much as the deal helps bolster Yahoo’s search ads and puts into question the Microsoft-Yahoo pact, Google also maintains an option out of the 3-year agreement if certain provisions are not met. Yahoo’s recent less than stellar Q3 earnings report may be putting a ticking clock on this new deal.