Yahoo & Google Together Again In New Search Deal

Three year deal to put Google’s results and ads into some of Yahoo’s search results needs US Department of Justice approval and still might get vetoed by India or EU action.

 

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Reunited, and it feels so good. Well, we’ll see if that line from the classic song plays out for Yahoo, which has revealed it wants to be together with Google again in a deal for search results. The deal excludes Europe, almost certainly to avoid anti-trust issues there. It also will depend on US Department of Justice approval.

The Deal, In Summary

As part of today’s Yahoo earning news, it revealed a new search deal with Google:

In October, the Company reached an agreement with Google that provides Yahoo with additional flexibility to choose among suppliers of search results and ads. Google’s offerings complement the search services provided by Microsoft, which remains a strong partner, as well as Yahoo’s own search technologies and ad products.

Wondering how Yahoo and Google can be together, when Yahoo is supposed to be with Microsoft? What we mean by Yahoo and Google being together again? And what’s in the deal? Come along.

Isn’t Yahoo With Microsoft?

If you’re thinking that Yahoo and Microsoft have a search deal, you remember correctly. They do and renewed that in April of this. year. Our FAQ: The New Yahoo-Microsoft Deal, Explained story also had more background on that.

As part of the renewal, Yahoo agreed that Bing’s ads would appear on 51% of the desktop searches that Yahoo delivers. The other 49% could be “powered” by Yahoo’s own ad system or from any third-party that Yahoo wanted to use.

As it turns out, by July, Yahoo was spotted testing using Google’s search results and ads. Clearly, Yahoo liked how it went. Now it’s planning to do more.

And Yahoo Had Been With Google Before?

Years ago — back in 2000 — Yahoo was partnered with Google to carry both Google’s search results and ads. That partnership maintained for many years, until Yahoo eventually developed its own in-house search technology and ad serving systems in 2004.

Yahoo gave up its own internal search technology when its search deal with Microsoft was formally established and got the go-ahead in 2010. But as that deal never performed as expected, and Yahoo’s been especially looking over the past two years for ways to generate more revenue from search beyond its deal with Microsoft.

What’s In The New 3-Year Google Deal?

Let’s go to the Form 8-K filing on the deal and look at the officialese, which I’ll break down as best I can into regular speak:

On October 19, 2015, Yahoo! Inc., a Delaware corporation (“Yahoo”), and Google Inc., a Delaware corporation (“Google”), entered into a Google Services Agreement (the “Services Agreement”). The Services Agreement is effective as of October 1, 2015 and expires on December 31, 2018.

Right off, we’re talking just over a three-year term. However, the agreement can end early for various reasons, as explained more below.

Google To Power Both Mobile & Desktop

Next up, this:

Pursuant to the Services Agreement, Google will provide Yahoo with search advertisements through Google’s AdSense for Search service (“AFS”), web algorithmic search services through Google’s Websearch Service, and image search services. The results provided by Google for these services will be available to Yahoo for display on both desktop and mobile platforms.

Basically, this says that Yahoo can show Google’s search results. And by search results, that means both the editorial “free” listings as well as the ads. Yahoo needs to serve both, because it has no editorial listings of its own, no crawler that combs the web for such content. And Yahoo probably can’t — or can’t afford — to show Google ads against editorial listings provided by Microsoft’s Bing search engine.

Could Yahoo Go Over 51% On Mobile With Google?

Yahoo also can use these results for both mobile and desktop. On desktop, it’s limited to a cap of 49% that potentially could come from Google, as Microsoft is guaranteed the other 51%.

On mobile, Yahoo has no such limit. There, it could choose to fully serve out Google results even at the expense of its own Gemini ads system.

Deal Excludes Europe, Probably For Anti-Trust Reasons

The deal is for these regions:

Yahoo may use Google’s services on Yahoo’s owned and operated properties (“Yahoo Properties”) and on certain syndication partner properties (“Affiliate Sites”) in the United States (U.S.), Canada, Hong Kong, Taiwan, Singapore, Thailand, Vietnam, Philippines, Indonesia, Malaysia, India, Middle East, Africa, Mexico, Argentina, Brazil, Colombia, Chile, Venezuela, Peru, Australia and New Zealand.

You can see all of North America is covered. Several Asian countries are included, as are Australia and New Zealand. Parts of South America are also covered. What’s missing? Europe.

Why not Europe? Google already has an anti-trust action happening against it in the European Union. It probably does not want the attention or criticism of doing a deal with Yahoo there, especially with Google already having a 90% or more marketshare in many EU countries.

Yahoo Has Flexibility, Could Skip Google Search Entirely

Next, this:

Under the Services Agreement, Yahoo has discretion to select which search queries to send to Google and is not obligated to send any minimum number of search queries. The Services Agreement is non-exclusive and expressly permits Yahoo to use any other search advertising services, including its own service, the services of Microsoft Corporation or other third parties.

Basically, this says that Yahoo doesn’t have to guarantee anything to Google. It could decide to send no queries to Google, if it wanted to.

Yahoo Gets Cut Of Ads, Amount Not Said; Image Search Named

How about getting paid? Well…

Google will pay Yahoo a percentage of the gross revenues from AFS ads displayed on Yahoo Properties or Affiliate Sites. The percentage will vary depending on whether the ads are displayed on U.S. desktop sites, non-U.S. desktop sites or on the tablet or mobile phone versions of the Yahoo Properties or its Affiliate Sites. Yahoo will pay Google fees for requests for image search results or web algorithmic search results.

This is pretty standard, saying that Yahoo will get a percentage of what Google makes off its ads that are shown on the Yahoo network.

That percentage can — and probably will — vary depending on whether it’s from desktop or mobile.

Interestingly, there’s no minimum guarantee from Google to be paid to Yahoo. That’s sometimes the case in these deals. It was in the original Yahoo-Microsoft deal.

Finally, Yahoo is obligated to pay Google if it uses its editorial (“algorithmic”) search results for web listings or images. This is likely to ensure that Yahoo doesn’t take Google’s listings but shows Yahoo’s own ads against them. In such a case, Google would be earning nothing yet providing a service.

Terminating In Case Of US Opposition

At the end, we get this:

Either party may terminate the Services Agreement

(1) upon a material breach subject to certain limitations;

(2) in the event of a change in control (as defined in the Services Agreement);

(3) after first discussing with the other party in good faith its concerns and potential alternatives to termination

(a) in its entirety or in the U.S. only, if it reasonably anticipates litigation or a regulatory proceeding brought by any U.S. federal or state agency to enjoin the parties from consummating, implementing or otherwise performing the Services Agreement,

(b) in part, in a country other than the U.S., if either party reasonably anticipates litigation or a regulatory proceeding or reasonably anticipates that the continued performance under the Services Agreement in such country would have a material adverse impact on any ongoing antitrust proceeding in such country,

Some history here. Back in 2008, Yahoo wanted to do a deal with Google. The US Department of Justice decided that would be bad on competitive grounds, so the companies abandoned that.

The DoJ decision left Yahoo with Microsoft as pretty much the only choice for doing a deal. As a result, the deal that Microsoft eventually offered to Yahoo in 2009 was much less lucrative than the one it offered in 2008, when it was competing with Google.

In the years since, the deal arguably has helped Yahoo drop from a second-place search engine in the US with its own search technology to a third-place competitor that’s dependent on others.

Clearly, there’s a fear that the US competition authorities still might not favor a Yahoo-Google tie-up, despite the fact that Yahoo is less dominant than it last was and a potential argument that the previous DoJ objection helped lead to Yahoo’s current decline.

In fact, at the end of the filing, there’s this:

In connection with the Services Agreement, Yahoo and Google have agreed to certain procedures with the Antitrust Division of the United States Department of Justice (the “DOJ”) to facilitate review of the Services Agreement by the DOJ, including delaying the implementation of the Services Agreement in the U.S. in order to provide the DOJ with a reasonable period of review.

This is all going to the Department of Justice for review. If approved, the companies will move ahead. Unless….

The EU And India Get Final Word

Even though the deal isn’t involving Europe, the agreement has termination language that involves possible EU objections:

(c) in its entirety if either party reasonably anticipates a filing by the European Commission to enjoin it from performing the Services Agreement or that continued performance of the Services Agreement would have a material adverse impact on any ongoing antitrust proceeding involving either party in Europe or India, or

The deal does involve India, where Google also faces anti-trust scrutiny, so the language including India makes more sense.

Google is almost certainly so paranoid that the agreement might impact its on-going anti-trust actions in both the EU and India that if gets the idea either political entity will object, the whole deal could be closed.

Other Termination Reasons

There’s a few last boilerplate reason the agreement might be terminated:

(d) in its entirety, on 60 days notice if [sic] the other party’s exercise of these termination rights in this clause

(3) has collectively and materially diminished the economic value of the Services Agreement.

Each party agrees to defend or settle any lawsuits or similar actions related to the Services Agreement unless doing so is not commercially reasonable (taking all factors into account, including without limitation effects on a party’s brand or business outside of the scope of the Services Agreement).

In addition, Google may suspend Yahoo’s use of services upon certain events and may terminate the Services Agreement if such events are not cured. Yahoo may terminate the Services Agreement if Google breaches certain service level and server latency specified in the Services Agreement.

If I read this correctly, either party could end with 60 days notice for any reason. Just because. There’s also a nebulous “certain events” that aren’t itemized, unknown reasons Google could terminate. Yahoo can drop if Google doesn’t serve content up quickly enough.

Stay Tuned For More!

The deal is a big deal, even if Yahoo is no longer the search powerhouse it once was. We’ll have further coverage of reaction and more details, as the emerge, so stay tuned to Search Engine Land.

Blue Links Be Gone: Yahoo Introduces Browser And Visual Search Experience “Axis”

Search launches seem to come in threes. A couple of weeks ago we had Bing Social, then came Google with Knowledge Graph and now Yahoo introduces Axis

When I met with Yahoo earlier this week to hear about it I received the now familiar speech that Yahoo is still very much in search and continuing to “innovate” around the UI and UX. There have been some interesting efforts along those lines on the PC in the past (Yahoo Search Direct), but Axis actually is genuinely different and noteworthy.

Three screen experience

Axis is available for all three screens: PC (as a browser plug-in), the iPad and the iPhone (as apps). Android is coming.

Axis is a fully functional browser that syncs content across all screens if users are signed in. Like other browsers Axis features tabs and book marks and can render any web page.

On the PC it functions more as a “companion” search bar at the bottom of the page on each of the major browsers: IE, Chrome and Firefox. Below is an example of how it looks on Chrome in the context of a search for “Hawaiian vacations.” I’ve got the standard Google results and then Axis results horizontally across the bottom of the screen:

Three screen experience

It doesn’t automatically insert or mirror the query you’ve done on Google or Bing or launch the module you see above. You have to manually enter the query at the bottom of the page. Then it offers a visual preview (live pages) of the top ranked sites. The ranking of these sites is somewhat different than conventional Yahoo search results. Clicks and time on the underlying sites are factored into the ranking of these Axis results.

Users can then horizontally scroll through results rather than clicking back and forth on links. These images run for the equivalent of the first two pages of search results and then you get text and descriptions. However Yahoo suggested that most people aren’t going to go beyond a page or two of results anyway. My sense is that people will horizontally scroll for “longer” than vertically.

While this PC experience is useful and provides a kind of secondary or back-up search capability, Axis is ultimately about delivering a better, mobile-optimized search experience that completely eliminates the “10 blue links.”

Getting rid of blue links

Yahoo special products director Ethan Batraski said that Yahoo was trying to get rid of the interim “second page” of search results (the list of links) and go right from the query to the web results in “one step.”

There have been other PC search engines and mobile apps to present visual results rather than links, most recently in mobile by Do@ (now Everything.me). All of those essentially failed. But Yahoo has the advantage of scale and greater visibility than any of the visual search startups that came before.

Whenever you’re on a specific website, you can pull down the page and see the horizontal bar of search results. It’s always there in the background. Touching another image loads that page but the search results remain in the background and accessible until you do a new query. You’re not hitting the back button to return to search results.

This functionality works relatively well on the iPhone (especially image search) but it really is best shown on tablets (iPad only for the moment). The larger screen enables the visual nature of Axis to shine.

There’s also a personalized home page with bookmarks and saved articles that carries across screens when signed in. Users can sign in with Yahoo, Google or Facebook log-in credentials to access the capability.

About the “Axis” name

I asked Yahoo about the name “Axis,” which I said reminded me of World War II. They responded that they went through many names and there are “negative connotations” to others as well, including Chrome and Safari (though not many readily come to mind). Another interesting element here is the black aesthetic.

Yahoo has done market testing and sees an opening with young, affluent early adopter males. (Perhaps the “Spike TV” crowd.) Jokes aside, the company is seeking to cultivate new audiences with Axis and the edgier image is part of that effort. It struck me a bit like a sports team adopting tougher-looking uniforms and colors.

Yahoo went to some length with me and in the press materials to underscore that there’s innovative technology on the back end behind Axis:

Axis is built upon the Yahoo! Cocktails mobile development platform, which is designed for creating deeply personalized products that are built for connected devices first. Comprised of Mojito, an open source JavaScript MVC framework and Manhattan, a cloud-based hosted environment, Cocktails is a blend of open, standard web technologies including HTML5, CSS3, JavaScript and Node.JS.

Differentiated but will it “move the needle”?

Doing my best Walt Mossberg, I can say that after using it for several days on both the iPhone and iPad, and to a lesser degree, on the PC I think Yahoo has created a useful and differentiated mobile search experience. The syncing and multi-screen capability are also useful, although not unique.

Search Direct is the mother/father of this experience. And if it “takes” we may see traditional Yahoo search on the PC incorporate some or many of these UI/UX features and elements. That very much remains to be seen and is contingent on the success of Axis.

There will inevitably be questions like, “Will it move the needle for Yahoo?”

I don’t know. It depends on how aggressively Yahoo promotes Axis, how many people try it out and how many continue to use it. However I don’t think we’ll see any dramatic change in user behavior in the near term. But it does put some additional UI pressure on Google in mobile search, which just released a new version of its iPhone app today.

There are no ads for now. But one can easily imagine display ads showing up among the visual search results in the not too distant future. Yahoo wants to build an audience before it starts inserting ads, however.

Because Axis is quite distinct from the traditional PC and mobile search experience some will like it but some may find it too foreign. However I would encourage you to try it. It’s definitely worth a test drive.