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Yahoo and Google Make a Deal

Yahoo and Google are back at it again, partnering in the search world! That’s what Yahoo is hoping for now anyway.

Yahoo has recently announced that their Q3 earnings are down, way down. Following on the back of that announcement, they also announced they have developed a new search deal with Google. Yes, you are correct, Yahoo and Microsoft still have a search deal as well; so how does Google play into all of this?

Let’s start at the beginning. Yahoo and Google partnered back in the early days of search to carry Google’s search result ads on Yahoo.com. Eventually, Yahoo created their own in-house search technology tool and ad serving system, breaking away from the Google to tackle search on their own.

Fast-forward to 2008 and Yahoo makes a deal with Microsoft, signifying that Yahoo had to run Microsoft’s Bing ads for desktop searches, which was revisited and renewed this year. As part of the renewal, Bing and Yahoo came to the agreement that Bing’s ads were required to appear on 51% of the desktop searches Yahoo delivers. The other 49% could be powered by Yahoo or from any third party that Yahoo wanted to use. Interestingly enough, there’s no restriction on the percentage of searches required to serve Bing ads for mobile or tablet traffic—the agreement only specifies that Yahoo must serve Bing ads on “the majority” of computer traffic (hence the 51% requirement).

This is where Google comes into play. Google and Yahoo have entered a 3 year agreement, active as of October 1, stating that Yahoo can show Google’s search results and ads on Yahoo.com and across Yahoo’s partner network. Still being within the confines of the Microsoft agreement, computers are limited to a cap of 49% that could come from Google; mobile has no limit and could be fully served with Google results if Yahoo so chooses. Yahoo will get a percentage of what Google makes off its ads that are shown on the Yahoo network, however, unlike the original Yahoo-Microsoft deal, there is no minimum spend guarantee from Google to be paid to Yahoo.

There are still a few things still need to be ironed out in this new partnership. The deal still needs federal approval, and this may take a while as Google is being extremely cautious as they face anti-trust issues in Europe. Yahoo also still has their competing ad platform, Gemini, which they are continuing to roll out. As long as advertisers continue to adopt Gemini, Yahoo will see a higher margin using their own platform and have less of a value outsourcing to Google.

So while this current news captures people’s attention, and the possibility of Google and Yahoo working together again is exciting, the impact for marketers in the foreseeable future will be minimal. We recommend that you keep an eye on industry headlines, and we will continue to keep you updated. Stay tuned…