msyhooMicrosoft’s search advertising group says it’s starting to wring more revenue out of the Internet search ads that it’s serving as part of its partnership with Yahoo — despite recently needing to extend, for another year, its commitment to cover revenue shortfalls experienced by Yahoo under the arrangement.

The news follows a report by the Wall Street Journal last week saying that Yahoo has been “quietly” trying to find a way out of the Microsoft search deal, without any luck so far. The report said that Yahoo CEO Marissa Mayer, the former Google exec, has been seeking to end the pact since she joined Yahoo last year.

In a post this morning on the Microsoft Advertising blog, general manager David Pann says the search advertising group has seen a 25 percent increase in click volume since last year, meaning that more people who conduct searches are clicking on the related ads. Under its partnership with Yahoo, Microsoft serves up the underlying search technology and related ads for both companies.

The key metric is revenue per search, an indicator of the effectiveness of the ads in attracting the attention of web searchers after they enter a keyword. Pann says the company is seeing “double-digit improvements” in revenue per thousand searches.

Pann writes, “As you may have read, Microsoft recently extended a revenue guarantee arrangement with Yahoo! – which will further stabilize our partnership and instill confidence in the continued success and growth of the Yahoo! Bing Network. From the beginning, we have remained committed to providing advertisers a viable alternative to Google in the search market.”

Microsoft’s Online Services Division, which includes the Bing search engine, improved its financial results in the March quarter with a $262 million net loss, compared with $480 million in the same quarter the previous year. Revenue in the division was up 18 percent to $832 million.

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Comments

  • guest

    Does MS’s leadership or PR hacks ever tire of pretending failure is really success?

    The reality is this deal has been a total bust for MS’s shareholders. More than $15b has been lost trying to compete against Google in search. Yet in the only geography MS and Yahoo are focused on, the US, Google has actually gained share since MS and Yahoo teamed up. And beating them has been so trivially easy that Google has extended its dominance in just about every other geography as well, while managing to simultaneously become the leader in smartphone and tablet OSs, despite MS’s decade head start, and emerge as the #1 threat to Exchange and Office. In other words MS has had its butt handed to it by Google, and faces an existential threat to its future as a result.

    And now Yahoo, who has failed miserably on their “sales” and growing share end of the agreement, want out because MS has failed to get RPS up to the levels Yahoo enjoyed pre-partnership. And MS is so desperate to keep them away from Google that they’re continuing to pay them guarantees w/o demanding compensation for Yahoo’s failures.

    When Ballmer finally gets dumped, which should have happened at least half a decade ago, the first thing a new CEO is going to do is exit search. This was classic Ballmer folly. Enter a new market without bothering to determine what if any unmet needs existed or how/if MS was uniquely positioned to address those. Instead MS dove in head first, only to realize years and billions later that search wasn’t broken, unmet needs were minor, and MS couldn’t match the development pace or innovation of even the incumbent giant Google.

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