Yahoo Inc. ( YHOO ) and
Microsoft Corp. ( MSFT ) have renewed
their search deal that guarantees revenue for each search made by a
Yahoo user using Microsoft's search engine, Bing. Following the
news, shares of Yahoo rose more than 3.00%.
The U.S. revenue-per-search guarantee (RPS) agreement was
initially struck in late 2009, renewed in 2011 and expired on Mar
31 this year. Effective Apr 1, the deal has been extended for
another year, according to recent SEC filings made by Yahoo.
According to the latest agreement, Microsoft will pay Yahoo a
minimum amount per search on Yahoo's website.
The partnership is intended to create a competitive front versus
Google Inc. ( GOOG ), the world's
leading search engine. But the partnership did not turn out as well
as expected and resulted in market share losses for Yahoo. The
company's revenues declined for three consecutive years before
registering a small gain last year.
The deal is Yahoo's first agreement with Microsoft since Marissa
Mayer took over as the CEO of the company in July. The extended
deal could help the company improve its search revenues going
forward. Last quarter, the company's search revenues were up
sequentially due to improvements in the quality of ads, better user
experience and new ad products.
Recently, Yahoo signed a global contextual advertising deal with
Google, according to which Google ads will appear on various Yahoo
properties and certain co-branded sites. This will further help the
company improve its search ad revenues.
However, Yahoo still has much to prove, given the growing
success of archrival Google and Facebook ( FB ). Facebook has
become extremely popular with users, so much so that it is already
the most popular social networking platform.
The extended deal could have some positive impact and help Yahoo
to generate additional dollars as Mayer's efforts indicate possible
improvements in Yahoo's search and Display business.
Currently, Yahoo has a Zacks Rank #1 (Strong Buy) while
Microsoft carries a Zacks Rank #4 (Sell).FACEBOOK INC-A (FB): Free Stock Analysis ReportGOOGLE INC-CL A (GOOG): Free Stock Analysis
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