Yahoo posted so-so quarterly results this afternoon, with revenue flat at $1.08 billion after adjusting for the cost of acquiring traffic. One reason for the underwhelming performance: Microsoft’s alliance with Yahoo still isn’t living up to either company’s expectations.
Can a former Google executive fix it?
Newly appointed Yahoo CEO Marissa Mayer, the former Google vice president, is in the middle of her first day on the job and didn’t participate in the conference call. Addressing Yahoo’s search alliance with Microsoft, she told the New York Times yesterday, “I actually think the partnership has been a positive for the company.”
Under the deal, Microsoft handles the underlying search and search advertising technology for both companies.
Tim Morse, Yahoo’s chief financial officer, told analysts that on the call that the joint Microsoft-Yahoo search advertising marketplace has been making progress, but he said revenue per search “continues to be below our goal.” As detailed in this past Business Insider story, Microsoft has been having a hard time effectively matching ads to search queries by Yahoo users, hurting revenue from search ads.
The companies “continue to work hard to materially improve performance,” Morse said on the call today.
In the meantime, Microsoft is providing extra payments to Yahoo to help cover the gap. But those only last for another nine months.
Revenue per search is a key measure of success for the agreement. Under the deal, Yahoo has an escape clause if RPS isn’t living up to expectations after five years. The deal was announced in 2009 and finalized in 2010.