In an attempt to bolster Yahoo Inc.’s lagging search business, the search engine has reached a deal in which Google will provide advertising and search results for some Yahoo users’ queries.
Microsoft Corp.’s Bing and Yahoo’s own in-house mobile search technology had previously powered Yahoo’s search engine.
Marketers whose ads appear on Yahoo through the Google AdSense program will pay a fee to Google, just as they do now for ads that appear on Google. Google, in turn, will pay Yahoo a percentage of the gross revenue from search ads displayed on Yahoo’s properties or affiliate sites. The deal, announced Tuesday, complements Yahoo’s similar deal with Microsoft in which Yahoo receives a percentage of revenue from Microsoft ads displayed on Yahoo sites.
The deal should help Yahoo generate more money from consumers’ search queries, says Justin D’ Angelo, director of client services at ROI Revolution Inc.
“Google monetizes search better than anyone, so it makes sense for Yahoo to strike this deal to be able to pull a certain percentage of queries away from Bing and funnel them to Google so that Google can serve up the free and paid listings,” he says. “This gives Yahoo the power to serve up more expensive Google ads for the next three years while advertisers adopt the Yahoo Gemini platform in the meantime.”
Gemini is an ad-buying platform introduced in February 2014. It is a self-service ad-buying marketplace that is Yahoo’s attempt to persuade marketers to use Yahoo data to buy native and video ads on Yahoo-owned sites such as Tumblr and other websites and apps.
While the move may help boost Yahoo’s bottom line, it likely will have little to no impact on retail marketers, says Collin Colburn, a Forrester Research Inc. researcher who covers search engine marketing.
“This deal isn’t going to change anything in terms of where marketers are allocating their paid search spending,” he says. “If I’m a retailer, it wouldn’t make sense to shift more money to Yahoo because I won’t see the incremental lift from doing so. That’s what search marketers are looking for and this deal won’t provide that.”
That said, the deal could tighten Google’s already-firm grip on the search market, he says. “That’s why Google is doing this. It wants to leverage the power it has.”
But for Yahoo, the deal is largely about generating more revenue from its search business. Even so, the arrangement opens the possibility that it improves Yahoo’s search in a significant enough way that it boosts Yahoo’s market share, which in September was 12.6%, according to digital measurement firm comScore Inc. Google’s market share was 63.9% and Microsoft’s was 20.7%. If it does lead more consumers to use Yahoo, then marketers might shift some of their paid search budgets to the platform.
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