One third of Yahoo revenue comes from Microsoft deal

By Rachel Hand topicIcon Internet News

Search Alliance pays off

Yahoo has revealed that almost one third of its revenue last quarter came from Microsoft.

According to Bloomberg, the US Securities & Exchange Commission (SEC) asked Yahoo in April this year to clarify several points relating to its finances, and specifically mentioned the Search Agreement with Microsoft. The company previously stated "more than 10 per cent" of revenue was attributable to the deal, but the SEC was eager to know more.

Yahoo's filing for September 2013 was made public recently, revealing a greater reliance than previously thought on its relationship with Microsoft. Page 27 of the filing states:

"Approximately 31 per cent and 30 per cent of the Company's revenue for the three and nine months ended September 30, 2013, respectively, was attributable to the Search Agreement."

In the same periods for 2012, the numbers were 27 per cent and 24 per cent respectively. It goes on to explain the ways this revenue is generated; Yahoo receives 88 per cent of revenue generated by Microsoft on Yahoo's properties and affiliate sites. This includes the natural and paid search results Microsoft provides for the Yahoo search engine.

Mayer dissatisfied?

The Search Alliance was first agreed in 2009 by former CEO Carol Bartz, with the search index switchover beginning in 2010. The agreement has not benefitted Yahoo as much as originally expected - Yahoo estimated a $500m boost to annual income - while the company has been troubled by declining overall search and display revenue. Discussing the deal, Mayer stated in February, "we need to see monetisation working better".

According to Search Engine Land, Yahoo will potentially be able to exit the 10-year deal in February 2015.

Daniel Nolan, managing director at theEword, commented: "These figures suggest that the Search Agreement has been beneficial for Yahoo, but on the other hand, it may indicate a reliance on the Microsoft partnership."