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Yahoo! Inc. (NASDAQ:YHOO) Renegotiates Its Search Deal With Microsoft Corporation (NASDAQ:MSFT)

Yahoo! Inc. (NASDAQ:YHOO) has renegotiated its search contract with Microsoft Corporation (NASDAQ:MSFT). Some of the new details can be found in the document filed by Yahoo in the SEC.

Some of the details of the new contracts are:

  • 93% of the gross revenue will be kept by Yahoo when it runs a Bing ad on its site. Earlier Yahoo had an agreement to keep 88% of the revenue.
  • Yahoo can take Bing’s algorithmic search results. While doing so Yahoo no longer has to take Microsoft’s ad listings next to those results. Yahoo will owe Microsoft a fee but will not owe a share of revenue from the ads.
  • The agreement can be terminated by either company at will after October 1. Earlier, to end the partnership, certain reasons had to be given by Yahoo.

Having a termination clause gives Yahoo more flexibility to control its affairs in the web search business. Yahoo CEO, Marissa Mayer, has tried to steer the company in a new direction by investing in new search technologies and has negotiated control of 49% of searche done on desktops.

The partnership is unlikely to be terminated despite the termination clause. Yahoo lacks engineering and infrastructure necessary for comprehensive Web search results. Microsoft is dependent on Yahoo to bring in traffic to compete, with Google for ad revenues.

The restructured deal means that Microsoft will power most of Yahoo’s search, but Yahoo can “enhance the search experience on any platform.” This means that other back-end search providers can be used by Yahoo. The deal guarantees minimum revenue per search.

Yahoo has continued to develop its search technology and could partner with Google on search results. In 2008, Yahoo and Google Inc (NASDAQ:GOOGL) planned an advertising partnership; however the deal was derailed due to regulatory issues.

The restructuring comes after a deal by Yahoo to replace Google as Firefox’s default U.S. search provider.

Published by Christine Lawrence

Christine Lawrence is a financial analyst. She loves analyzing socioeconomic trends in the background of financial moves. She has overall seven years of experience in Auditing, Finance and Writing.



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