Ads become focus for Yahoo in Microsoft deal

Ronny Kerr · August 3, 2009 · Short URL:

Microsoft will address the algorithms, while partner Yahoo controls ads, content, and mobile

YahooAs details emerge in the deal made (finally) between Microsoft and Yahoo, we will see both parties settling into their respective roles as parts of a new greater whole.

Microsoft will continue to focus on spreading the word about Bing to a market largely satisfied with industry-leader Google, while fine-tuning the engine’s infrastructure to be as good as, if not better than, the search engine whose name is now a verb.

Yahoo, on the other hand, will be turning all its energy and attention to advertising, content, and mobile services. Expansion of content should be expected from Yahoo considering their forays there already. Likewise, the expansion into mobile services is an obvious move, as yearly increases in mobile usage show no signs of slowing.

The hard turn to advertising, on the other hand, is a little more interesting, considering that for the first five years of the deal with Microsoft, Yahoo will receive 88% of revenues from advertising on Yahoo-owned search sites. After that, a new rate will be negotiated. Obviously, Yahoo will want its premium advertising service to attract the clients with the biggest wallets to best capitalize on the current rate the company can earn from ad revenues.

According to Yahoo CEO Carol Bartz, the deal with Microsoft takes a bit of the competitive load off of Yahoo.

"My first reaction when I got here was that I wouldn't even do a search deal," Bartz told the New York Times in an interview, "until I looked at our expense structure and our actual options and looked at what our prime job was, which is to grow audience."

Apparently, after taking a hard look at Yahoo’s budgets and future, Bartz realized that the company didn’t have the financial muscle power to keep up with either Microsoft or Google in marketing and drawing in advertising buyers, while at the same time mastering search efficiency. Because of that very fact, combined with Yahoo’s role in the deal with Microsoft, some have been quick to call the pact as the death of Yahoo.

Nevertheless, Bartz is quick to promise the opposite, declaring, "We haven't eviscerated the company."

One thing is certain though. With Yahoo turning its energies toward ads, content, and mobile, Yahoo search is effectively dead. The fight is now between Google and Bing.

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