Yahoo, Microsoft Amend Search Agreement -- Update

By Angela Chen 

Yahoo Inc. and Microsoft Corp. have updated their search partnership to allow more flexibility in how the results are presented and how the advertising teams are managed.

The news comes after months of negotiation over a deal that has caused friction between the two tech giants. Shares of Microsoft slipped 7 cents in morning trading to $42.18, while Yahoo shares added 7 cents to $45.80.

The new terms update the original 2009 agreement, created by the predecessors to the current chief executives, Microsoft's Satya Nadella and Yahoo's Marissa Mayer.

Under the original 10-year agreement, Microsoft provided search services on computers for Yahoo, and paid Yahoo a percentage of Bing revenue delivered from the latter company's searches. Microsoft controls the technology underpinning searches across both companies' sprawling universe of websites. Yahoo at times has chafed at elements of the partnership, which generates 37% of its revenue.

Now, Yahoo will have increased flexibility on how the results are presented on desktops and mobile devices. Yahoo, though, will continue serving Bing ads and results for a majority of its desktop search traffic.

Microsoft also will become the exclusive sales force for ads for Bing, while Yahoo will be the exclusive sales force for its Gemini ads.

Both will then integrate the sales teams with the engineering teams, which "will allow both companies to service advertisers more efficiently, " the companies said. That transition will occur this summer.

Representatives for both companies weren't immediately available for further comment.

The 2009 contract allowed for the partners to re-examine the deal at its halfway point, which passed in February. In late March, the companies mutually agreed to extend the deadline to April 24.

Ms. Mayer, a former Google Inc. search executive, had made it clear she is unhappy with the terms of the partnership. She has worked to bulk up Yahoo's Web-search technology and ad sales in areas that don't infringe on the agreement with Microsoft, such as searches done on mobile devices.

Neither Yahoo or Microsoft alone can hope to attract the number of searches executed by Google. Before Yahoo and Microsoft teamed up in search, the two companies together handled about 28% of Web searches in the U.S. In February, their combined market share amounted to 32.6% of U.S. desktop searches, according to comScore Inc.

Write to Angela Chen at [e-mail]

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