Microsoft loses exclusivity in shaken up Yahoo search deal

Yahoo now only needs to use Bing results for a majority of searches.

Ars Staff – Apr 16, 2015 5:53 pm | 59

Microsoft will continue to provide search results for Yahoo, but in a reduced capacity. The two have renegotiated the 2009 agreement that saw Redmond become the exclusive provider of search results for a company that was once known for its own search services. This came amid speculation that Yahoo would try to end the agreement entirely.

The two made the original agreement after Microsoft decided against buying Yahoo for $45 billion after a series of rebuffs from Yahoo. Under the agreement, Microsoft was the sole provider of desktop search services for Yahoo, with Yahoo taking responsibility for signing up advertisers. This deal allowed Yahoo to back out after five years if revenue per search did not hit certain targets, and there was no exclusivity for mobile search.

The new terms appear to be more favorable to Yahoo. Microsoft’s Bing is no longer the exclusive provider of Yahoo search results on the desktop. Yahoo will still use Bing results and Bing ads for a “majority” of desktop search traffic, but can now “enhance the search experience” with other technology. This puts desktop search on a similar non-exclusive footing to mobile.

What might that enhanced experience be? Yahoo has continued to develop its own search technology even during the Microsoft deal, and it’s not impossible that the company could partner with Google on search results, though regulatory issues might make this tricky. Yahoo and Google planned an advertising partnership in 2008, but this was derailed over competition concerns. With the EU going after Google for allegedly abusing its dominant position in search, it’s likely that any potential tie-ups with Yahoo would run into difficulties.

The companies are also reorganizing their ad sales efforts. Microsoft will now exclusively sell the ads delivered by Bing ads, and Yahoo will sell ads shown through its own Gemini platform.

This new deal comes just days after comScore estimated that Bing took 20.1 percent of US search traffic in March. This is the highest share that Bing has achieved since its June 2009 launch. Yahoo, powered by Bing, had 12.7 percent, and Google still has the lion’s share of the market at 64.4 percent.

As such, Yahoo’s share may be less important to Microsoft than it once was. In 2014, Microsoft estimated that its Bing business would be profitable on a standalone basis by the 2016 financial year, and while the change in terms with Yahoo could potentially be a setback to this, it’s clear that Bing is now an established name in search when it wasn’t before.