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Yahoo and Microsoft just announced a renewed search partnership.

But the renewed deal comes with major changes.

The most important: Yahoo used to have to put Bing ads against 100% of its search results.

Now Yahoo can do whatever it wants with 49% of its search results.

Yahoo could, for example, sell the other 49% of its search traffic to Google.

This is a huge win for Yahoo CEO Marissa Mayer.

Sources close to Yahoo have long claimed such a deal would immediately boost Yahoo revenues. One source estimated that if Yahoo were able to outsource all of its search traffic to Google, it would boost its revenues by $1 billion annually. That kind of deal isn't in play, but something like it is.

There are a couple of reasons a Yahoo-Google search ads deal may not happen.

Mayer talks a lot about Yahoo's own ads. They are called "Gemini" ads. If Yahoo were able to make those ads as effective as Google's, the company would be able to keep all of the revenue generated by them, instead of sharing money with Google. It may be tempting for Mayer to try that path first.

Plus, Google already owns a virtual monopoly in search advertising, and it may not want to draw attention from the Department of Justice with a big deal that would further grow its market share.

Regardless, this deal will allow Yahoo a lot more flexibility with its costs. Under Yahoo's old deal with Microsoft, Yahoo's sales force was responsible for selling Bing search ads. Now that task falls to Microsoft.

Mayer could use Yahoo's current search sales force to sell Yahoo ads against as much as 49% of Yahoo's search traffic, or she could get rid of the sales force and outsource that 49% to Google or another search ads provider.

Mayer has cut Yahoo's headcount by 800 or so in the past couple of months, but some analysts think she needs to shed another 1,400. Cutting Yahoo's search ads sales force would help her get there.


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3 comments

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said Saïd Amin (@said) Pinned comment
I'm this close to adding a new +TechNews rule.

Yea.

That rule.

No BI submissions permitted! ;)
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techie Techie (@techie) replied to Saïd Amin (@said) Pinned comment
LOL
Do you know she couldn't manage her first project at Google, so after struggling for any months, they hired a new developer and he did in a month :D
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said Saïd Amin (@said) replied to Techie (@techie) Pinned comment
Did not know that.

She certainly ended up having a great career at Google before landing the Chief Yahoo role.
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