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Microsoft Extends Ad Guarantees To Yahoo Through 2013

At the Yahoo’s Q3 2011 earnings call on October 18, Microsoft and Yahoo annouced of extending their revenue-per-search (RPS) guarantee through 2013 as evidence of their mutual commitment to their two-year-old search pact.

Microsoft’s AdCenter technology, the system for buying and delivering online ads, has never produced the sort of revenue that Yahoo anticipated. So Microsoft has remitted quarterly payments to Yahoo to make up the difference. In Yahoo’s third quarter, Microsoft paid the company $53 million under the terms of the deal.

Yahoo’s interim chief executive, Tim Morse, said the company worked to extend the deal because it was hearing “a lot of discomfort” from investors over the company’s ability to generate the expected revenue.


Yahoo execs said by the end of the company’s third quarter, Yahoo had closed “nearly 30 percent of the RPS gap that existed in April 2011. The pair are working to close the remaining gap “as quickly as possible.”

“Both companies remain fully committed to the success of our Search alliance and the RPS guarantee extension represents an important sign of that commitment,” said Yahoo Chief Financial Officer (and acting CEO) Tim Morse.

Yahoo officials also said that Microsoft and Yahoo expect to complete the “algo” (algorithm) transition of all markets by some time in November. (The transition has to do with moving users from Yahoo Search to Microsoft search for Web, image and video across both desktop and mobile.) The transition in the Korean market still needs to happen, officials said.

In addition, Yahoo completed the paid Search transition in India this quarter and is expecting to begin transition activities for additional page-search markets early in 2012, company officials said.

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