Yahoo and Google this afternoon announced an agreement to put ads from Google’s AdSense and AdMob systems on Yahoo sites. It’s a non-exclusive deal, but it’s also a clear sign that Yahoo CEO Marissa Mayer is willing and able to do business with her former colleagues at Google.

What does that mean for Microsoft and its search alliance with Yahoo?

Microsoft sent this statement in response to GeekWire’s questions about the announcement: “The strategic alliance we entered with Yahoo! allows them to enter into agreements with other providers in the contextual advertising space. Bing Ads contextual offering is one of those providers.  We continue to work closely with Yahoo! on making our Search Alliance successful for both companies.”

Microsoft and Yahoo launched their search alliance in 2009, joining forces in an effort to compete more effectively against Google. Microsoft provides the underlying search technology for Yahoo and powers the search-related advertising platform. So far, the results haven’t met expectations, and after coming on board, Mayer was talking extensively with Microsoft CEO Steve Ballmer about improving the partnership last year, according to AllThingsD.

Under the deal, Microsoft made sizable payments to Yahoo for a period of time to guarantee a certain level of revenue per search, making up for shortfalls in the transition to Microsoft’s ad platform. But those payments won’t go on indefinitely. In its most recent quarterly filing, Microsoft said it expects “the remaining cost of the revenue per search guarantees will be less than $100 million.”

Yahoo’s Microsoft search alliance is slated to run for 10 years, but as noted by Danny Sullivan in this extensive post last year, Yahoo can terminate (or renegotiate) the deal if it doesn’t meet financial benchmarks.

With this latest announcement, it looks like Yahoo is at least keeping its options open.

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  • mark

    Looks like the beginning of the end for the partnership. MS should probably use this development and the surprisingly mild FTC judgment against Google to start gracefully exiting the Bing effort or spinning it off to someone else. They’ve lost a lot of money. Google’s search share hasn’t been impacted at all. And it hasn’t proved to be the distraction to Google that MS clearly hoped it would be, thereby slowing them down in other areas. Hate to say it because I like competition and MS’s exit would basically leave Google uncontested. But if you can’t win there’s no point continuing to lose money pretending you can.

  • Tim Acheson

    This is no surprise.

    Google has effectively taken over Yahoo with Meyer’s appointment. Presumably deliberately, Google has achieved by the back door an acquisition the regulators would not have allowed. It’s a typical back-handed anti-competitive strategy from Google.


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