Yahoo inches a bit more out of its Microsoft search deal

Yahoo is moving ahead with its plans to wriggle out of its 10-year search pact with Microsoft, as a new Yahoo 8-K filing makes clear.
Written by Mary Jo Foley, Senior Contributing Editor

In April, Yahoo and Microsoft announced a revised version of their search pact, dating back to 2009. On October 20, Yahoo took the next step toward wriggling a bit further out of its Microsoft deal.

MJ Foley
Back in April, Yahoo received the official green light to ramp up its own search business. Yahoo (and Microsoft) also gained the right to terminate their joint search agreement any time after October 21, 2015 after delivering a written notice of termination, though the agreement would remain in effect for four months after notice was given.

Today, October 20, during Yahoo's earnings call, Yahoo officials made it official that Google would provide some results and some ads for Yahoo search queries.

The original Microsoft-Yahoo pact called for Yahoo's sales force to be the exclusive one selling the Microsoft-Yahoo search and advertising platform to advertisers. (Microsoft continued selling its own display ads, as did Yahoo.) But as of April 2015, Microsoft became the exclusive salesforce for ads delivered by Bing Ads and Yahoo is the exclusive salesforce for Yahoo's Gemini ads.

From Yahoo's October 20 8-K filing,:

"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."

The filing notes that Yahoo and Google have agreed to some kind of review process with the U.S. Department of Justice pertaining to the agreement.

I asked Microsoft for comment on Yahoo's latest moves. No word back so far.

Update: A Microsoft spokesperson said today's developments are simply Yahoo making good on the flexibility in its arrangement that it negotiated back in April. Microsoft's take, from that same spokesperson:

"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."

Yahoo's filing comes the same day as its disappointing Q3 earnings report, and a couple of days ahead of Microsoft's Q1 FY 2016 report.

Microsoft officials said last quarter that they expected Bing to hit break even during Microsoft's fiscal 2016, an achievement enabled at least in part by Microsoft's pact with Yahoo.

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