Yahoo chief Marissa Mayer sought to unravel Microsoft ad pact: Report
08 May 2013
Yahoo! Inc chief executive officer Marissa Mayer undertook an unsuccessful bid to unravel a 10-year search-advertising pact with Microsoft Corp in favour of a deal with Google Inc, Bloomberg reports citing unnamed people familiar with the matter.
Mayer who started the effort to end the agreement soon after becoming Yahoo CEO in July, met with resistance from Microsoft CEO Steve Ballmer, according to the people, who declined to be identified as the meetings were private.
Microsoft's agreement to provide the technology for Yahoo web searches had fallen short of estimates which prompted Mayer to seek alternatives, according to the people. The deal, which would expire in 2020, was struck by Ballmer and former Yahoo CEO Carol Bartz in 2009.
By way of consolation for the poor performance of its search ads, Microsoft agreed to pay revenue guarantees to Yahoo through March 2014 extending an arrangement between the companies that expired last month, according to Sunnyvale, California-based Yahoo's regulatory filing yesterday.
Mayer had also met with representatives of Google, her former employer, who had verbally agreed upon an alternate search-ad partnership in the event of an arrangement with Microsoft coming unstuck, one of the people said. According to Google chairman Eric Schmidt's statement in October, the company would consider a search deal with Yahoo if the web portal inquired.
Meanwhile, Yahoo yesterday reached its highest closing price on Wall Street since 11 June, 2008. Two major disclosures in the company's official quarterly report filing with the Securities and Exchange Commission were responsible for the burst of optimism: An extension of its search deal with Microsoft and the financial performance of Yahoo's Asian holdings.
Microsoft agreed to extend its deal with Yahoo, which guaranteed Yahoo-specific revenues for every search that took place on its website. Many leading observers had believed that Microsoft would not renew its revenue guarantee after its expiry in late March.
According to Danny Sullivan of Sullivan of SearchEngineLand the deal was extremely good for Yahoo because the expected revenues would never be reached.
He wrote that a Yahoo-Google partnership could be in the making if Microsoft ever did back out of its revenue guarantee. In the absence of the deal, according to Yahoo chief financial officer Ken Goldman's estimates Yahoo would have lost $50 million to $60 million for the rest of 2013, The Associated Press reports.
However, Yahoo's gains in Asia could mean a much bigger financial windfall than $60 million. As evident from the filing yesterday which showed that Alibaba -- in which Yahoo owned almost a quarter of the stake, even after selling off a huge chunk of its holding, nearly doubled its revenues last year $1.8 billion and bringing in $642 million.