Yahoo chief fails to unravel Microsoft advert deal

PUBLISHED : Thursday, 09 May, 2013, 12:00am
UPDATED : Thursday, 09 May, 2013, 5:18am


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Yahoo chief executive Marissa Mayer has attempted unsuccessfully to unravel a 10-year search-advertising pact with Microsoft in favour of a deal with Google, people familiar with the matter said.

Mayer began the effort to end the agreement soon after becoming Yahoo chief in July, and she has met with resistance from Microsoft chief executive Steve Ballmer, said the sources.

Microsoft's agreement to provide the technology for Yahoo web searches hasn't met estimates, prompting Mayer to seek alternatives, the people said. The pact, which expires in 2020, was reached in 2009 by Ballmer and former Yahoo chief executive Carol Bartz.

As a consolation for the poor performance of its search ads, Microsoft agreed to pay guaranteed revenues to Yahoo until March 2014. That extends an arrangement between the companies that expired last month, Yahoo said in a regulatory filing.

Mayer has also met with representatives of Google, her former employer, who have agreed verbally upon an alternate search-ad partnership should the arrangement with Microsoft end, one of the sources said.

Google chairman Eric Schmidt said in October that the company would consider a search deal with Yahoo if the web portal inquired.

Mayer's inability to negotiate an end to the agreement means Yahoo will probably be bound to Microsoft until 2015, when either side may choose to terminate the deal.

The agreement can also be scrapped in the event that Microsoft sells or closes its Bing search engine, according to the deal's terms. Another cause for cancellation: Yahoo's revenue per search falls below 40 per cent of Google's average revenue per search, one of the people said. Neither of those conditions is likely to be met, this source said.

We have an alliance that we're actively working on together, and we continue to work together for the success of this partnership

"Microsoft is an important partner, and we continue to work closely together," said Sara Gorman, a spokeswoman for Yahoo. Jessica Powell, a spokeswoman for Google, declined to comment.

"We have an alliance that we're actively working on together, and we continue to work together for the success of this partnership," said Adam Sohn, a spokesman for Microsoft.