Last month, Yahoo released its Q3 earnings report. During the call with investors, the search company also took the opportunity to drop some big news: they have entered into a search and advertising deal with Google.
For years, Yahoo and Bing were joined at the hip trying to dethrone Google, with Bing providing organic and paid algorithmic search services on Yahoo. The companies also had a revenue sharing agreement. This partnership with Bing is still in place, despite the new Google deal.
Yahoo is on its way to becoming a melting pot of various paid and search algorithms.
The company is viewing the Google deal as an opportunity to be more flexible with its search services. Searching on Yahoo will now either net you organic results and/or ads from any of Google & Adwords, Bing & Bing Ads or Yahoos’ own search algorithms & its own native ad platform Gemini.
The agreement also allows Google image results be shown on both on desktops and mobile devices for Yahoo search.
Why This Agreement Makes Sense for Yahoo
Before partnering with Bing in 2010, Yahoo tried to strike a similar deal with Google. That partnership was blocked by the US Justice Department on the grounds of it thwarting competition.
Yahoo has been struggling recently – posting a 9% drop in revenue year-over-year. Net revenue for the company has been down year-over-year for nine of the past 11 quarters. These are concerning numbers for Yahoo, who is trying to adapt its business model for 2015.
Yahoo also feels that by entering into the deal with Google, it is doing a service to its users by taking advantage of multiple data sources and advertising streams, theoretically making their search results stronger than ever.
How This Agreement Affects Advertisers
The new search agreement absolutely has an effect on businesses engaging in search engine marketing. Yahoo’s margin 12.7% share of U.S search queries, while small on the surface, represents an incredibly large audience that will be receiving impressions from Adwords. These impressions will fall under the Google Search Network – not search partners, so automatically, impressions should see a boost.
While it may be a stretch, this partnership could actually improve conversion rates, being as a ComScore study revealed searchers on the Yahoo/Bing Network spend 6.8% more money online than those searching on Google.
How Gemini is Affected
Yahoo’s ad platform Gemini has been a best-kept secret of sorts for some advertisers, due to its lack of competition and low CPCs. Gemini has continued to grow and add new features like retargeting in recent months, but some wonder if this partnership will bring the end of Gemini, given how well-oiled Adwords has become.
Yahoo’s President and CEO Marissa Mayer, a former Google employee, sees opportunity with Gemini moving forward.
“The Yahoo Gemini platform is really where we want to invest, particularly on mobile in new formats, new ideas,” she said.
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