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Yahoo’s recently renewed search pact with Microsoft includes a termination clause that allows either company to walk away from their years-long partnership.
The clause, part of an amended search partnership announced last week between the two companies, allows either company to terminate the arrangement at any time after October 1 by delivering written notice to the other company, according to a filing Monday with the US Securities and Exchange Commission. Under the terms of the previous agreement, a 10-year deal signed in 2010, Yahoo could terminate the deal only if certain revenue metrics were not met.
Microsoft and Yahoo announced the amended deal Friday, saying that it gave Yahoo more “flexibility to enhance the search experience” across mobile and desktop devices. In addition, the companies modified their handling of ad sales, with Microsoft now exclusively handling the Bing ads on Yahoo Search and Yahoo continuing to sell ads through its own Gemini ads platform.
The update to the search deal came 6 years into a 10-year pact between the companies. In 2009, the companies’ then-CEOs — Microsoft’s Steve Ballmer and Yahoo’s Carol Bartz — signed a deal that would see Micorosoft’s Bing platform power Yahoo search. In return, Yahoo would be the exclusive sales force for ads and would receive a significant sum each year to be the brains behind Yahoo search.
Representatives for Yahoo and Microsoft did not immediately respond to a request for comment. 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 2013, saying that the arrangement hadn’t delivered the increased revenue or market share that was expected.
“One of the points of the alliance is that we collectively want to grow share rather than just trading share with each other,” Mayer told attendees at the 2013 Goldman Sachs Technology and Internet Conference in February. “I’m not confused. 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. That’s up from the 88 percent of revenue Yahoo received for the first five years of the partnership and a 90 percent bump Yahoo received in February.
