What You Need to Know About the Amended Yahoo / Microsoft Deal

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Adotas is pleased to present a Q&A with adMarketplace’s President and Chief Operating Officer Adam Epstein about what the amended Yahoo/Microsoft deal means to online advertisers, ad networks, and publishers.

Microsoft Corp and Yahoo have amended a 2009 search partnership. The result is that Yahoo now has more control over how search results are displayed on desktops and mobile devices. This changes the 10-year-old search partnership, originally formed by former Microsoft CEO Steve Ballmer and former Yahoo CEO Carol Bartz. The significant changes include:

Before: Microsoft controlled how Bing displayed search results on Yahoo websites accessed on PCs.

Now: Microsoft will own ads delivered from its own Bing Ads platform.

Before: Yahoo was responsible for sales for Bing search ads.

Now: Microsoft and Yahoo plan to transition sales responsibilities starting this summer.

Before: Microsoft paid Yahoo a percentage of Bing ads revenue delivered from Yahoo searches.

Now: That stays the same.

Q: What does this renewed partnership mean for Yahoo and Microsoft?

A: Microsoft will now have to build out its direct sales team for premium advertisers, which is a role Yahoo had been filling. Integrating its sales and engineering teams will ultimately prove to be a good thing for advertisers, as it will increase efficiency and fix the fundamental flaw of this alliance.

Yahoo has a chance to expand Gemini on a larger scale, including desktop, and gets back into search.

Q: What do you consider to be the fundamental flaw of this partnership?

A: The original sin of the Yahoo/Bing partnership was that it split engineering and sales between the two companies. Microsoft controlled matching and pricing, but Yahoo had the advertiser relationships and performance data. You can’t deliver full value to advertisers and publishers without both context and data.

Q: What does this mean for Google?

A: The big question is whether Yahoo will try to sell search traffic to Google and use Google ads on 49% of their traffic not contractually tied to Bing. Google should be reluctant to take on more search market share, especially after the EU confirmed antitrust allegations and the FTC leak showed how close they are to antitrust charges in the US.

Q: What does this mean for advertisers?

A: The best case scenario is that advertisers will have two strong alternatives to Google, which will add more competition to the search industry. In the worst case scenario, Yahoo turns to Google and Microsoft is slow to execute on the sales side.
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