Yahoo CEO Marissa Mayer has been under fire for the company’s poor financial performance. Now, she’s looking for a little help from some old friends. She’s inked a deal with Google to help rescue her firm from its doldrums.
The news comes on the heels of Yahoo’s third quarter earnings announcement. The company reported $1.23 billion in revenue, falling slightly short of analysts' expectations of $1.26 billion.
Gross search revenue was $870 million for the third quarter of 2015, an increase of 2 percent compared to the third quarter of 2014. GAAP display revenue was $509 million for the third quarter of 2015, a 14 percent increase compared to the third quarter of 2014. But that’s still not good enough for some industry watchers. The deal with Google could help.
“As we move into 2016, we will work to narrow our strategy, focusing on fewer products with higher quality to achieve improved growth and profitability," said Mayer during yesterday's third-quarter earnings call. "In addition to sharpening focus within core business growth, our top priority is the planned spinoff of Aabaco Holdings. This is an important moment for the company, and we continue to strive to complete the spin as quickly as we can."
A Unique Moment
During a phone call reviewing third-quarter results, Mayer announced the deal with Google. Google will provide Yahoo with search ads. Yahoo, in turn, can pick and choose which search queries to send to Google. Financial terms of the deal were not disclosed.
“We see a unique moment and opportunity for Yahoo as we move into 2016 to narrow our strategy and focus on fewer products with higher quality to achieve better growth and better results," Mayer said, adding more details will be provided early next year.
Mayer joined Yahoo as president and CEO and member of the board of directors effective July 17, 2012. Mayer came to Yahoo from Google, where she was responsible for Local, Maps, and Location Services, as well as the company’s suite of local and geographical products, including Google Maps, Google Earth, Zagat, Street View, and local search for desktop and mobile. She was Google’s 20th employee. But in the last few months some industry watchers have been calling for her resignation due to her failure to produce the turnaround stockholders expected.
What Does This Mean?
We caught up with Greg Sterling, vice president of strategy and insight at the Local Search Association, to get his thoughts on the news. He told us Mayer has long wanted to do this deal and so has Google. In other words, no one should be hugely surprised at the agreement. But what does it really mean for both companies?
“It could significantly benefit Yahoo both in the U.S. and internationally if it can be implemented, by providing more ads to serve and different search results to choose from,” Sterling said.
“There are many scenarios under which the deal may not go through, however. Specifically, if it will negatively impact the antitrust actions against Google going on in Europe or India, it may not happen.”