Yahoo CEO Mayer Said to Seek Ways to End Microsoft Search Deal

May 8 (Bloomberg) -- In today's "Movers & Shakers," Bloomberg's Betty Liu reports that Yahoo CEO Marissa Mayer is exploring a termination of a search deal with Microsoft and is seeking an alternative with her former employer, Google. She speaks on Bloomberg Television's "In The Loop."

Yahoo! Inc. (YHOO) Chief Executive Officer Marissa Mayer has attempted unsuccessfully to unravel a 10-year search-advertising pact with Microsoft Corp. (MSFT) in favor of a deal with Google Inc. (GOOG), according to people familiar with the matter.

Mayer began the effort to end the agreement soon after becoming Yahoo CEO in July, and she has met with resistance from Microsoft CEO Steve Ballmer, said the people, who asked not to be identified because the meetings were private.

Microsoft’s agreement to provide the technology for Yahoo Web searches hasn’t met estimates, prompting Mayer to seek alternatives, the people said. The pact, which expires in 2020, was reached in 2009 by Ballmer and former Yahoo CEO Carol Bartz.

As a consolation for the poor performance of its search ads, Microsoft agreed to pay revenue guarantees to Yahoo through March 2014. That extends an arrangement between the companies that expired last month, Sunnyvale, California-based Yahoo said in a regulatory filing yesterday.

Mayer also has met with representatives of Google, her former employer, who have agreed verbally upon an alternate search-ad partnership should the arrangement with Microsoft end, one of the people said. Google Chairman Eric Schmidt said in October that the company would consider a search deal with Yahoo if the Web portal inquired.

Photographer: David Paul Morris/Bloomberg

“We’re happy with the relationship,” Marissa Mayer, chief executive officer of Yahoo! Inc., said today during a technology conference hosted by Wired magazine. “We have been working really well together.” Close

“We’re happy with the relationship,” Marissa Mayer, chief executive officer of Yahoo!... Read More

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Photographer: David Paul Morris/Bloomberg

“We’re happy with the relationship,” Marissa Mayer, chief executive officer of Yahoo! Inc., said today during a technology conference hosted by Wired magazine. “We have been working really well together.”

Mayer’s inability to negotiate an end to the agreement means Yahoo will probably be bound to Microsoft until 2015, when either side may choose to terminate the deal.

Termination Possible

The agreement can also be scrapped in the event that Microsoft sells or closes its Bing search engine, according to the deal terms. Another cause for cancellation: Yahoo’s revenue per search falls below 40 percent of Google’s average revenue per search, one of the people said. Neither of those conditions is likely to be met, this person said.

“Microsoft is an important partner, and we continue to work closely together,” Sara Gorman, a spokeswoman for Yahoo, wrote in an e-mail.

Jessica Powell, a spokeswoman for Mountain View, California-based Google, declined to comment.

“We have an alliance that we’re actively working on together, and we continue to work together for the success of this partnership,” Adam Sohn, a spokesman for Redmond, Washington-based Microsoft, said. “There’s real momentum in our ad platform and the product quality share.”

Mayer has publicly praised Microsoft as a key partner in the effort to gain share in Internet search.

“We’re happy with the relationship,” Mayer said yesterday during a technology conference hosted by Wired magazine. “We have been working really well together.”

In private meetings with her staff and members of Microsoft’s search team, she has criticized the company, saying it has a fraction of the indexed Web pages Google has, one of the people said. Mayer has also said Microsoft’s search results are not as diverse as Google’s, this person said.

The Wall Street Journal reported earlier on Mayer’s attempt to end the partnership with Microsoft.

To contact the reporters on this story: Douglas MacMillan in San Francisco at dmacmillan3@bloomberg.net; Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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