Last week, Yahoo and Microsoft announced modifications to the original terms of their partnership. While the original framework remains in place, the changes will give both Microsoft and Yahoo more autonomy. It appears that Yahoo has gained a slight advantage in the deal and can now move more freely towards implementing innovative products. Specifically, Yahoo has been actively pursuing development opportunities in the contextual/predictive search space, and this new deal will enable them to further their efforts in this area.
What is changing?
Under the original contract, Yahoo was required to serve Microsoft Bing ads for searches on desktops. In the new deal, Yahoo will only be required to show Bing ads 51% of the time and can use their discretion for what ads show in the other 49% of searches. This not only removes the restrictiveness of showing Bing ads, but also gives Yahoo the flexibility to use its own technology (or partner with another provider) to generate 49% of search results. This is a large shift from the original agreement in which Yahoo abandoned its search technology in favor of Bing’s.
Impact on Paid Advertising
The performance of Bing ads have not met the high expectations set out at the onset of the merger and many advertisers will be looking to see if this change significantly impacts performance. Yahoo will now have the ability to expand its Gemini platform - which serves mobile and native ads - to desktop. Additionally, Yahoo could revisit partnering with Google to power its search technology. A Google/Yahoo alliance would create a powerful platform that would benefit both companies as well as retailers that utilize the service. However, any such alliance would need to overcome regulatory hurdles in the US and internationally.
Yahoo has not released a specific date when the new contract terms will be implemented but Yahoo has indicated changes may occur in the next few weeks. Advertiser’s can get a head start on preparing for these changes by taking the following actions:
- Set up accounts with each entity to avoid any issues when they officially separate. (Under the current contract, ad management sometimes overlapped between Yahoo and Bing.)
- Utilize Yahoo’s Gemini platform to gain familiarity with it and gather mobile/tablet performance data. This will establish strong baseline data from which to compare cross-device performance if Yahoo expands Gemini into desktop.
How much retailers benefit from changes to the Yahoo/Bing contract will depend heavily on Yahoo’s ability to innovate and effectively use their platform to increase competition in this space. Even with this expanded scope, Yahoo’s ad serving market share (~ 5-6%) remains a small portion of the overall search landscape. Yahoo is burdened with making management of their platform efficient for advertiser’s and increasing their customer’s experience. Adlucent will work closely with Yahoo to navigate this transition and leverage its experience running campaigns on the Gemini platform to provide its clients with the most efficient results across all platforms.