By Douglas MacMillan
Yahoo and Microsoft's 10-year search pact could end well before
the decade is out.
The two companies have amended the terms of their partnership to
let either party terminate the deal at any point in time after Oct.
1, according to a filing Yahoo made on Monday.
Having an opt-out clause gives Yahoo more freedom to control its
own destiny in the business of Web search. In a break from her
predecessors, Yahoo chief Marissa Mayer has invested in building
new search technologies and negotiated to control up to 49% of
searches done on desktops under the new terms of the Microsoft
pact.
Under the original deal, which began in February 2010, Yahoo
could only terminate the deal if its revenue from each search
failed to meet certain financial-performance benchmarks, and could
only ask to do so during the 10-year pact's hallway point, which
just passed.
Yahoo or Microsoft can now walk away from the deal before it
expires in 2020 "by delivering a written notice of termination,"
according to the filing. After that, the search agreement will
remain in effect for a four-month transition period before
ending.
Though their partnership has been rocky, it is unlikely either
side would walk away anytime soon. Yahoo lacks the technology
infrastructure and engineering staff necessary to deliver
comprehensive Web search results. And without Yahoo, Microsoft
would find it difficult to generate enough traffic to compete with
Google for search advertising dollars.
The amended search agreement also slightly changed the terms of
the partners' revenue sharing. Yahoo will now get 93% of revenue
from search ads served on its own pages, before paying out Web
publishing partners. In the first five years of the deal, Yahoo
received 88% of revenue from searches after paying partners. That
percentage increased to 90% in February.
The companies announced some of the terms of the revised pact
last week, emphasizing Yahoo's new abilities to control how search
results are presented on both desktop computers and mobile devices
and Microsoft's new responsibilities to sell ads on its Bing search
site. They didn't discuss changes to the termination clause.
In its press release, Yahoo said the "existing underlying
economic structure" of the deal "remains unchanged."
Write to Douglas MacMillan at douglas.macmillan@wsj.com
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