Google & Yahoo working on a 3-Year Deal

Today, during a call with investors about earnings, the Yahoo management team presented the investors with a bit of a confidence booster in news of a partnership with Google. According to the press release containing details on Yahoo’s business highlights:

In October, the Company reached an agreement with Google that provides Yahoo with additional flexibility to choose among suppliers of search results and ads. Google’s offerings complement the search services provided by Microsoft, which remains a strong partner, as well as Yahoo’s own search technologies and ad products.

Yahoo & Google Partnership History

You may have forgotten, but this isn’t the first time the two search giants joined hands. The first came in 2000 when Google won the partnership when Yahoo moved away from Inktomi. Yahoo’s search results have rarely been “Yahoo” search results, often being supplied or managed by a provider. In many of these deals, Yahoo not only benefits from the service of a respected search platform but in the deal of 2000, Yahoo gained shares of Google, that was privately-held at the time. Wonder what those stakes look like today?!

During the deal that lasted from 2000 to 2004, Google search results were mixed with Yahoo searches, creating a blend that Yahoo’s algorithm manages. Although Yahoo didn’t have a very large market share at the time (or now) they didn’t care and in the renewal of the Google deal in 2001, the main change was in the Yahoo directory, when it went from being a free platform to a $299 paid system. Since then, Yahoo has connected with Yext for business listing. It’s kind of their strategy, to just generate revenue through partners and businesses that believe in Yahoo. If you’re a statephile, you can check out Danny Sullivan’s article on the old partnership. This first partnership lasted until February 2004, at which time Yahoo returned to using it’s on algorithm and technology for search results and ad delivery.

What should be noted is that each geographical area, such as the UK and Japan, have their own versions of the search results. Part of a global or multilangual optimization strategy involves ensure use of language support for traffic from different locations. You may have seen URLs containing .eu, .au, .fr, or others. In 2010, Yahoo Japan, chose to use Google technology, powering 90 percent of web searches, instead of following the U.S. based Yahoo that elected to use Microsoft Bing in 2010 (NY Times). Chief Executive of Yahoo Japan Masahiro Inoue was quoted as saying, “At the present time, we feel there are quite a few areas where Microsoft is not yet ready, Google is one step ahead in Japanese-language services.”

Nuances of the Current Deal

In this 2015 deal, Google isn’t taking over the results just augmenting the results. After signing a 10-year deal with Microsoft Bing in April 2015, that mirrored the one from 2010, Yahoo had renegotiated the rights to partnerships and the ability to use other technologies in the results, aside from Bing’s. As reported by Vindu Goel in July of this year, “Under the revised deal, Yahoo can use its own search technology or that of other providers for up to 49 percent of its search results.”

What this really means is that Bing is used for 51% of all Yahoo search results. The other 49% is up to Yahoo to fill in. That means it can be Yahoo, Google, Blekko, you name it. This deal and many others with Yahoo focus on ad revenue more than the search results. And that ladies and gentlemen is part of the reason why Yahoo has seen a steady decline in their share of search and revenue. Little innovation has come from the Yahoo camp, relying on the recognition and quality of other providers to do the “lifting” when it comes to results.

Contained in the legal filings, the deal has these key elements:

• Effective Period: October 1, 2015 until December 31, 2015.
• Both free and paid Google results are included.
• The 51/49 limit does not extend to Mobile Devices (whatcha doing, Bing?!).
• Only global property not included in the Google deal is Europe (Anti-trust may be to blame, according to SEL).
• No guaranteed delivery of Google results, but Yahoo gets a cut of ad revenue.

The only other catch is that the deal isn’t fully implemented yet as the European Union (EU), US Department of Justice, and Indiana all have some say in the agreement and could feasible nix it.

The Wrapper

This is all very familiar territory for us digital technophiles. We have sensed tremors in the force for a while but it is only recently that we’re seeing some of the cards being played by Yahoo and Google. Yahoo just doesn’t appear to be holding many good ones and I would wager that at some point in the future, we may see Yahoo pull out of the search game all together in favor of an alternative platform such as live streaming or content aggregation.