Microsoft, Yahoo: The Search Party Continues

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Tech giants Microsoft and Yahoo have announced plans to strengthen their search partnership in an effort to improve the search experience across platforms, create value for advertisers, and increase stability for partners.

The alliance itself is not new. Microsoft and Yahoo joined forces in 2009 in a collaboration formed Steve Ballmer and Carol Bartz, their respective CEOs at the time. In an effort to compete with Google, they developed a 10-year plan under which Microsoft's search tools appeared on Yahoo websites and Yahoo took on a sales role.

Their partnership made waves when it hit the news cycle. Yahoo's stock took a 12% hit while investors worried that the deal undervalued its technology and feared privacy, integration, and regulatory problems. Microsoft CEO Steve Ballmer claimed that future benefits to the search and advertising collaboration were "a little bit complicated."

Six years later, current CEOs Satya Nadella and Marissa Mayer have reaffirmed their commitment to most parts of the original agreement. They have also agreed to implement a few key changes, intended "to keep the partnership strong and productive," writes Yahoo in an April 16 news release.

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"Over the past few months, Satya and I have worked closely together to establish a revised search agreement that allows us to enhance our user experience and innovate more in our search business," said Marissa Mayer, who also notes that the renewed partnership creates "significant opportunities."

As part of the 2009 agreement, the companies agreed that Microsoft technology would power paid and algorithmic search services for Yahoo on PCs. There was also a revenue-sharing portion in which Microsoft was required to give Yahoo a percentage of Bing Ads earnings delivered through Yahoo searches. In its announcement on today's updates, Yahoo notes that the underlying economic structure will stay the same.

The first critical change involves giving Yahoo the flexibility to enhance the search experience across digital platforms, as the agreement is non-exclusive to desktop or mobile devices. Yahoo will continue to serve Bing ads and search results for the bulk of its desktop search queries, but this alteration gives it some wiggle room to pursue other opportunities in search.

In a second major update intended to boost agility and sales, Microsoft will become the sole salesforce for advertisements delivered by its Bing Ads platform. Yahoo will no longer handle Bing search ads, but it will continue to manage sales for its Gemini Ads platform.

Both Microsoft and Yahoo have presence in the search space but continue to be dwarfed by market giant Google. According to comScore data, Google sites dominated the search space with 64.4% market share in March 2015. Microsoft sites made up 20.1%, while Yahoo sites took 12.7%.

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