A source familiar with the negotiations told CNET that both companies were in favor of the clause, which is seen as encouraging an ongoing dialog and reducing anxiety. The amended deal comes as the chief executives of both companies attempt to transform the profiles of their respective companies. Yahoo CEO Marissa Mayer has shifted her company's focus to mobile devices and how to generate revenue off those products. Mobile is also a priority for Microsoft CEO Satya Nadella, who is pushing services and mobile with a greater emphasis on cloud services.
However, the relationship hasn't yielded the revenue-per-search guaranteed by the partnership, prompting Microsoft to twice extend the RPS guarantee for another year. Yahoo CEO Marissa Mayer expressed her dissatisfaction with the partnership in , saying that the arrangement hadn't delivered the increased revenue or market share that was expected. Our biggest business problem right now is impressions.
The amended search deal also modifies the terms of the deal's revenue sharing arrangement. Under the new deal, Yahoo will keep 93 percent of the revenue generated by ads served on its pages. It gave that up as part of the deal with Microsoft.
Drop Microsoft, and Yahoo would have to quickly find a Web search partner to power the bulk of its listings that are so very important to a major search engine. Google is the only real choice, and Yahoo might not be able to go to Google without regulatory approval. That leads to the financial hurdle.
While Yahoo waits on an approval process, it also has little search ad serving technology left. That also was largely handed over to Microsoft. Even if Yahoo could go without Web listings, it would still be stuck having to redevelop search ads — taking a loss until that was done.
The guarantee took effect on April 1, according to Yahoo's latest Q filing. If this didn't happen, Microsoft agreed to make up the difference, what's called the RPS guarantee. Microsoft hasn't hit the RPS targets since that time, resulting in Microsoft agreeing in late to extend the guarantee until this March. Microsoft's AdCenter technology, the system for buying and delivering online ads, didn't end up providing the kind of revenues Yahoo anticipated when it forged its search deal with Microsoft.
To make up for the shortfall, Microsoft has made quarterly payments to Yahoo.
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