Microsoft, Yahoo extend their possible search-deal termination date

Microsoft and Yahoo have another month before they'll announce whether their 10-year search pact will continue as it currently stands.
Written by Mary Jo Foley, Senior Contributing Editor

March 23 came and went with no word about whether Microsoft and Yahoo would be terminating or extending their 10-year search partnership.

Now we know why there was no update: The pair have agreed to extend the possible exit deadline for Yahoo from the pact by another month, as noted in an 8K filing with the Securities and Exchange Commission by Yahoo on March 27.

In July 2009, Microsoft and Yahoo signed a 10-year deal following Microsoft's decision against buying Yahoo for $45 billion, as then-CEO Steve Ballmer had proposed back in 2008. The 2009 deal specified that Microsoft would power Yahoo search, and Yahoo become the ad sales force for Microsoft's premium properties.

The deal also included a clause that gave Yahoo the option to exit the partnership at the five-year mark, in February 2015, if Yahoo's 12-month average revenue-per-search (RPS) in the U.S. was less than a certain percentage of Google's estimated RPS.

Microsoft has been compensating Yahoo for the RPS shortfall over the past few years. In December 2013, Yahoo reportedly admitted it had garnered 31 percent of its quarterly earnings from Microsoft -- substantially more than the 10 percent Yahoo previously had claimed publicly.

Yahoo has been working on a variety of search-related projects as a way to keep its hand in the search space. CEO Marissa Meyer has been up front about distaste for the Microsoft deal. Microsoft execs, for their part, claim the relationship between the two has stabilized over time.

Microsoft has been using its search partnership with Yahoo to grow its Web-search marketshare. But Microsoft, in the meantime, also has been integrating Bing into more and more of its products and services, as well as into Windows SKUs like Windows with Bing, in an attempt to increase usage of Bing indirectly.

Microsoft officials said earlier this year that they believe Bing will be profitable by the second half of calendar 2015.

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