) has signed a global, non-exclusive contextual advertising deal
) to generate impressive revenue growth in future years.
Following the news, shares of Yahoo rose more than 1.5% in
Google ads will now appear on various Yahoo properties and
certain co-branded sites using Google's AdSense for Content and
AdMob services. Google will retain a part of the revenues
generated from the ads displayed on its partner sites. Though the
exact ratio wasn't disclosed, website owners who display the kind
of ads covered in the agreement would likely get to keep 68% of
Contextual advertising is a form of targeted advertising in
which the content of an ad is in direct correlation to the
content on the web page. Hence, Yahoo will be able to display
contextually relevant ads on its web properties, including Yahoo
Sports and Yahoo News.
This will help the company to improve its search revenues
going forward. Last quarter, the company's search revenues were
up both sequentially as well as from the year-ago quarter due to
improvements in the quality of ads.
The alliance will also benefit Google by providing it with
additional space to run its ads and increase its advertising
revenues. Last year, Google's ad sales on its partner sites
totaled $12.5 billion.
The deal comes seven months after Marissa Mayer, formerly one
of Google's top executives, took over as the CEO of the company.
Analysts have been predicting that Mayer's old ties with Google
might eventually improve its relationship with Yahoo and help
Mayer to produce more impressive growth in future years.
However, confidence in Yahoo's prospects remains low, given
the growing success of archrival Google and
). Facebook has become extremely popular with users, so much so
that it is already the most popular social networking
On the other hand, Yahoo has repeatedly failed to deliver. The
company's revenues continued to decline for three consecutive
years before registering a small gain last year. Yahoo already
has a broad search and advertising partnership with
), which did not turn out as well as it had hoped. The company is
steadily losing market share and it remains to be seen whether
the current CEO can reverse the trend.
Though the deal could have some positive impact and help Yahoo
to generate additional ad dollars, we will take a wait-and-see
approach because Yahoo is still struggling despite Mayer's
sincere efforts on all fronts.
Currently, Yahoo, Google, Facebook and Microsoft, all carry a
Zacks Rank #3 (Hold).
FACEBOOK INC-A (FB): Free Stock Analysis
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