updated 04:10 pm EDT, Tue May 7, 2013
Analyst increases Yahoo gross revenue estimate by $60M
Microsoft has extended its revenue guarantee with Yahoo, according to an SEC filing. The revenue-per-search guarantee, part of the ten-year deal the two companies struck in 2009, will be extended by one additional year, allowing Yahoo to earn more revenue than it otherwise would have if the guarantee fully elapsed.
The guarantee makes sure that Yahoo will receive a minimum amount of funds from Microsoft for each search, regardless of the performance of its search ads. Originally set to last for 18 months, the guarantee was extended in 2011 to last until March 2013, with Reuters reporting it having been extended for another full year from April 1st. The extension is extremely useful to Yahoo, as its present advertising rates for search are lower than when the deal with Microsoft was struck.
UBS analyst Eric Sheridan has increased his estimates for gross revenue for the next four quarters, valuing the extension at around $60 million for the entire year.
Despite the guarantee extension, current Yahoo chief executive is hoping to reverse the company's multi-year revenue and traffic decline. "We need to see monetization working better because we know that it can and we've seen other competitors in the space illustrate how well it can work," said Mayer to an investor conference earlier this year.
The partnership, initially minted while Yahoo was being managed by Carol Bartz, would in theory have allowed the two companies to work together against Google in search, though the relative market share of the three services have remained relatively static.