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Showing posts with label MSN Yahoo search. Show all posts
Showing posts with label MSN Yahoo search. Show all posts

April 21, 2011

The Unfolding of Yahoo Search Revenue Disaster


During the last two quarters, Microsoft has taken over Yahoo’s U.S. search advertising in return eventually for 12 percent of Yahoos’ search revenues. The red line shows what Yahoo got to keep after paying Microsoft, and the blue line is what it makes off of search before paying Microsoft. That blue line is down 8 percent in the last two quarters You can see the gap between the red and the blue lines in the second chart below. 

Yahoo continues to have consistent  lousy quarters. Revenues were down 6 percent, profits were down 28 percent. What’s more, it’s search partnership with Microsoft isn’t going so great. And the finger pointing is starting.

In a very detailed analysis, Danny Sullivan of SearchEngine Land charts the decline of Yahoo’s search revenues over the past two years. What he calls “net search revenues” (the money Yahoo gets to keep after paying off partners) is down 35 percent from a peak of $551 million two years ago to $357 million. He shows the decline in this first chart below. 

Before the fourth quarter of 2010, Yahoo used its own ad platform. But in late October 2010, it began carrying ads from Microsoft. This was part of the Yahoo-Microsoft deal, where Yahoo largely gave up having its own search technology and ad system, outsourcing this to Microsoft.

As part of the deal, Yahoo agreed to pay Microsoft 12 percent of its net search revenues. The red line reflects this, net revenues that were left after payments went out to Microsoft. This big new chunk of money flowing out is what Yahoo has been calling “headwind” that has accelerated its year-over-year growth decline.

 According to Techcrunch 
"The Microsoft Yahoo Deal  is not working out as planned, and Yahoo blames Microsoft. It’s not quite where it should be yet in terms of its revenue per search. Yahoo CEO Carol Bartz said during the earnings conference call:

"adCenter isn’t yet producing the RPS [revenue per search] we hoped for and are confident as possible."

What is implies is that  Microsoft is under-monetizing Yahoo's properties(search). And organic search results from Bing apparently are too good, which makes people click the paid search ads even less. Even Yahoo’s inflated search market share figures (due to slideshows and other forced search methods) weren’t enough to generate more revenues.