Yahoo to Microsoft: We Want Out!

Since her arrival as Chief Executive Officer to Yahoo, Inc. almost a year ago, Marissa Mayer has been struggling to end their 10 year search deal with Microsoft, which started in 2010, for a more lucrative partnership with search giant and former employer Google, but Microsoft has no intentions of letting Yahoo out of their deal.

Under the terms of their contract, Yahoo is obligated to utilize Microsoft’s Bing search engine for search Yahoo Bing search dealresults on Yahoo sites. Yahoo and Microsoft also have a revenue guarantee which expired and was extended for an additional 12 months (U.S. only) on March 31, 2013.

This arrangement allocates 12% of the revenue received from Yahoo’s search advertisements to Microsoft. In return, Microsoft guarantees Yahoo a set amount of revenue for every search query made on a Yahoo site. Although Microsoft’s revenue guarantee is worth $12-$15 million a quarter, according to the Wall Street Journal, Yahoo’s revenue per search has been its worst since they partnered with Microsoft.

In February, Mayer said the partnership between Yahoo and Microsoft was not delivering. “One of the points of the alliance is that we collectively want to grow share rather than just trading share with each other,” Mayer said at the Goldman Sachs Technology and Internet Conference in San Francisco.

In a recent regulatory filing, Yahoo disclosed their desire to terminate their arrangement with Microsoft, but will either have to wait until 2015 (the halfway mark of the contract), the sale of Bing to another company by Microsoft, or revenue-per-search dipping below their agreed threshold to make any moves.

If Yahoo and Google do eventually partner, this partnership could have a tremendous impact on search as we know it.

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