Last week was a big time for Yahoo and Microsoft, as they announced some important new terms for their Search Alliance agreement. After doing some renegotiation, Yahoo is now able to serve its own ads on the PC, allowing them to potentially work with other partners.
Even though it’s not likely that Yahoo would be working with rivals like Google to serve ads on their network, Yahoo will be extending its own Gemini ads int PC search results.
There was an “8K” filing yesterday which went into more detail as to what was announced last week. To be specific, both parties have the ability to freely terminate the entire Search Alliance relationship at any point prior to the formal expiration of the 10 year term:
The term of the Search Agreement remains 10 years from its commencement date, February 23, 2010, subject to earlier termination as provided in the Search Agreement. Pursuant to the Amendment, on or after October 1, 2015, either Yahoo or Microsoft may terminate the Search Agreement by delivering a written notice of termination to the other party. The Search Agreement will remain in effect for four months from the date of the termination notice to provide for a transition period, however, Yahoo’s Volume Commitment will not apply in the third and fourth months of this transition period.
So, what if this possibility becomes reality? The agreement would remain in place for a four-month transition period.
Yahoo also gets the option to serve only Bing organic listings, only paid listings or both under the new terms. If Yahoo requests but doesn’t serve ads from Bing, it’s obligated to pay Microsoft’s costs:
Yahoo will now have the ability in response to queries on both personal computers and mobile to request algorithmic listings only, paid listings only or both algorithmic and paid listings from Microsoft. To the extent Yahoo requests algorithmic listings only or requests paid listings but elects not to display such paid listings, Yahoo will pay Microsoft serving costs but not a revenue share. In other cases and with respect to the Volume Commitment, Yahoo will pay Microsoft a revenue share.
As mentioned before, the only thing that Yahoo is really obligated to do is to serve paid search ads from Microsoft “for 51 percent of its search queries originating from personal computers accessing Yahoo Properties and its Affiliate sites. . .”
The revenue share that Yahoo gets from Microsoft has also increased slightly (from 90 to 93 percent):
Yahoo is entitled to receive a percentage of the revenue (the “Revenue Share Rate”) generated from Microsoft’s services on Yahoo Properties and on Affiliate sites after deduction of the Affiliate sites’ share of revenue and certain Microsoft costs. Under the Search Agreement the Revenue Share Rate was 88 percent for the first five years and then increased to 90 percent on February 23, 2015. Pursuant to the Amendment, the Revenue Share Rate will be 93 percent, but will now apply before deduction of the Affiliate sites’ share of revenue.
Even though it isn’t likely that Yahoo will walk away from Microsoft/Bing in the near future, since there would be costs involved that Yahoo would have to fit, CEO Marissa Mayer is rebuilding the search and paid-search infrastructure at Yahoo, laying the foundation for a potentially independent Yahoo at some point in the future.