Yahoo has not been especially happy in its 10-year search partnership with Microsoft, so it's not surprising that the company has successfully negotiated an early opt-out clause into the agreement.
Yahoo announced the amended agreement in a document filed before the U.S. Securities and Exchange Commission. The company says the new opt-out provision – which allows Yahoo and Microsoft to terminate their search partnership anytime after Oct. 1 – will give Yahoo "flexibility to enhance the search experience" throughout both desktop and mobile devices.
Under the original agreement devised by then-CEOs Steve Ballmer of Microsoft and Carol Bartz of Yahoo, Microsoft's Bing search platform would power Yahoo search, giving Microsoft a significant chunk of the search market to be able to compete with Google in advertisements. Meanwhile, Yahoo would be the exclusive platform for Bing search ads, receiving 88 percent of all ad revenue.
Also under the original agreement, Yahoo could only terminate the partnership if certain revenue per search benchmarks were not met — a condition that has not yet been satisfied even as the partnership has reached its halfway point.
With an amended agreement underway, Yahoo or Microsoft will be able to terminate their partnership before it reaches its 10-year conclusion. Either party can do so by "delivering a written notice of termination," which would be followed by a four-month transition period before the partnership fully ends.
Yahoo was also able to negotiate slightly higher shares in ad revenues. In February, CEO Marissa Mayer bumped up Yahoo's share to 90 percent of all total revenue. The figure is now up to 93 percent before paying out advertising partners and web publishers.
Now, Microsoft will be allowed to sell its search ads on its own platform, and Yahoo search will now be relying on Bing for 51 percent of search ads and search results. The remaining 49 percent of web searches will have to rely on Yahoo's own infrastructure, which means Yahoo could be reinvigorating its own search engine soon.
In 2013, Mayer expressed dissatisfaction about the partnership with Microsoft, saying it had yet to generate the revenue boost expected from the agreement.
"One of the points of the alliance is that we collectively want to grow share rather than just trading share with each other," she said at the Goldman Sachs Technology and Internet Conference at the time.
"We need to see monetization working better because we know that it can and we've seen other competitors in the space illustrate how well it can work."
Photo: Magnus Höij | Flickr
