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What To Expect From The Google-Yahoo Deal

Oct 30th, 2015

Yahoo recently announced that it has agreed a new deal to send a portion of its search traffic to Google; but what does this mean for the world of online advertising?

On Tuesday 20th October, Yahoo released its third-quarter revenues for the year. The bad news is that its revenues were below their projections; the good news is that they announced a new search partnership, or ‘Service Agreement’, with Google, which will help to boost the revenue they generate through their search platform.

What are the details of the deal?

Yahoo will send a share of its traffic to Google, which will generate revenue for Yahoo through the AdSense platform. This will enable Yahoo to expand its ad service and search queries as it currently lacks the technology to do so.

It doesn’t have an obligation to the amount of data they send to Google, but Yahoo will get a cut of what Google makes off its ads that are shown on the Yahoo network. This amount will vary depending on whether they are “displayed on U.S. desktop sites, non-US desktop sites or on the tablet or mobile phone versions of the Yahoo Properties or its Affiliate Sites.” Yahoo cannot use its own ads against Google listings without paying a fee, which would obviously not be in Google’s interest.

How does this affect Yahoo’s deal with Microsoft?

None of this should affect Yahoo’s current deal with Microsoft. As you may or may not be aware, Yahoo and Microsoft struck a deal back in 2009 to share Yahoo’s technology and Microsoft’s Bing Ads platform. However, in April this year, Yahoo and Microsoft have decided to renegotiate the deal. This allowed Yahoo to work with other companies (such as Google) whilst still sending a fixed amount of traffic to Bing, set at 51%.

Since the new deal was put in place, Yahoo has been doing testing with Google to see if a deal with them would be viable for both parties. Also, the limit of 51% only applies to desktop searches; this means that, if they so wished, they could send the remaining 49% of desktop and all of their mobile traffic to Google at the expense of their Gemini platform.

Yahoo’s deal with Microsoft allows it to work with other companies (such as Google) whilst still sending a fixed amount of traffic to Bing, set at 51%

What could go wrong?

As some of you may be aware, Google and Yahoo do have a history together. Back in 2008, an alliance between the two was blocked by the Department of Justice in the United State of America, who were worried the deal would almost completely monopolise the market. As the current deal would be less lucrative, plus Yahoo aren’t as strong a competitor as they were in 2008, there is less chance of legal proceedings being taken against the two.

Another potential stumbling block is that Google currently has anti-trust cases running against it in the EU and in India. In light of this, as well as the deal currently excluding Europe, both companies have worked certain clauses into the contract to avoid any more legal proceedings:

The ‘Service Agreement’ will not come into effect until the US Department of Justice completes a review, to avoid a repeat of any anti-trust issues.
The whole agreement can be terminated if the EU or India, where Google is under anti-trust investigations, objects to the deal.
Either party can terminate the contract with 60 days’ notice.
If Yahoo is not having content served up quickly enough, it can end the agreement.
Google can end the deal “upon certain events”, which is a very vague term that Google has not specified publicly.

So what does this mean for you?

For anyone who is using Bing Ads, this should not affect you as Yahoo still has to send the same amount of traffic to Microsoft, so you should still get the same amount of traffic for your ads. The only thing to keep an eye on would be Yahoo Gemini, although the chances of Yahoo sending all of their traffic to Google and Microsoft is unlikely considering how much they have been pushing Gemini as a service.

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