However, in the bad-news column for Yahoo, according to PaidContent, T-Mobile has now swapped it for Google as the default search engine on the T-Mobile portal. However it’s no longer clear how valuable these portal deals are, as the market shifts to smartphones. Most of the mobile internet activity takes place on smartphones, though not entirely.

Consumers have more options to access the content and services they are loyal to on smartphones, rather than simply accepting and using the carrier-designated services. Though it’s an “empirical question” anecodotal evidence argues that carrier portals have little or no impact on smartphone users. They may exist in some form but can simply be ignored by consumers.

Google is already the dominant mobile search engine, so this switcheroo of the T-Mobile “default” relationship doesn’t necessarily help Google or harm Yahoo in a major way. There will be some incremental loss or gain (depending on which company we’re talking about) in search query volume and related clicks however.

The US-search engine carrier alliances are now as follows:

• Verizon-Bing (although Android phones feature Google)
• AT&T-Yahoo
• Sprint-Google (and MSFT to a much lesser degree)
• T-Mobile-Google (the company still has a search relationship with Yahoo in Europe)

When Verizon “turned on” the default Bing search deal late last year some Verizon subscribers revolted, which shows that these deals don’t necessarily yield the desired outcome.

Postscript: PaidContent also has details of a Yahoo reoganization that saw the elimination of the mobile group, in favor of a more integrated approach in which mobile is component of everything.

The partnership integrates Twitter’s real-time social experiences with Yahoo!’s global network of nearly 600M people. Together with the recently announced Facebook integration, this relationship is a key part of advancing Yahoo!’s social strategy, transforming it into a highly customizable social experience that lets people unify their activity from their many social experiences across the Web.

The integration also provides Yahoo! with full access to the complete Twitter public data stream, which Yahoo! will use to improve the relevance and freshness of content across Yahoo! properties. This will drive deeper user engagement, and create new and compelling opportunities for developers, advertisers, and publishers.

Mechanically here’s how it will work according to Yahoo:

• People will be able to access their personal Twitter feeds across Yahoo!’s many products and properties, including the homepage, Yahoo! Mail, Yahoo! Sports, and others, letting them check in more easily on what’s happening with the people and things they care about while on Yahoo!.
• People will be able to update their Twitter status and share content from Yahoo! in their Twitter stream, so they can easily share their Yahoo! experiences with their friends and followers on Twitter.
• Yahoo! Search and Yahoo! media properties like News, Finance, Entertainment, and Sports will include real-time public Twitter updates across a variety of topics. Yahoo! Search users will immediately see real-time Twitter results today; go to Yahoo! and try it out.

Yahoo is also implementing Facebook Connect and, according to AllThingsD, will also be doing a version of these integrations with LinkedIn and MySpace as part of a so-called “project Rushmore.”

I have two quick and opposing thoughts:

• The  integration of real-time search data by the major engines (Google, Yahoo, Bing) basically “co-opts” the movement and will likely marginalize the group of real-time engines that emerged to fill the void before Google, Yahoo and Microsoft were doing it.
• Will this particular Twitter-Yahoo integration benefit Yahoo in any way? Beyond search itself, we haven’t seen how it will play out across the Yahoo properties. One could imagine novel and useful implementations in news, finance, mobile and local. However that remains to be seen.

Yahoo will continue to have a career site (at least for the next three years) but it will be powered and populated by Monster:

Monster and Yahoo! have also entered into a three year commercial traffic agreement, to take effect upon the closing of the acquisition, in which Monster will become Yahoo!’s provider of career and job content on the Yahoo! homepage in the United States and Canada. The traffic agreement calls for performance based annual payments calculated by clicks and expressions of interest, subject to annual floors and ceilings. In addition, the traffic agreement provides Monster with an exclusive right for a period of time following the closing of the acquisition to negotiate similar traffic agreements with Yahoo! properties on a global basis, including countries in Europe, Asia and Latin America, subject to certain limitations.

The price is $225 million in cash (Yahoo acquired HotJobs for $436 million in 2002). PaidContent summarizes some additional terms (based on an SEC filing), including a non-compete between the two companies. The related, potential sale of Yahoo Small Business has reportedly been called off.

Given that Yahoo decided shortly after CEO Carol Bartz joined to outsource search, presumably a “core” asset, one is lead to wonder what will Yahoo retain as it moves forward, as the company seeks to reduce costs and boost margins.

Bartz’s remarks on the recent Yahoo Q4 earnings call may hold some clues. She identified the “homepage, mail, messenger, news, sports, finance and entertainment” as key areas. This is a relatively casual, top-of-mind list she rattled off during her opening comments, but it may indicate what Yahoo wants to “retain” for itself. Bartz added about 2009 as a whole, “We [ ] decided to close down products that didn’t drive engagement or proudly represent Yahoo.”

In addition, Bartz spent a great deal of time talking about Yahoo’s display advertising business and related technology. The emphasis is on attracting brand advertising dollars and delivering TV-scale (or larger) audiences to them:

[W]e are still ahead in the display game and we intend to keep it that way. Frankly our competition is television. That is where major advertisers spend most of their money and where we are taking share. As a result, video is becoming increasingly important . . .

But we are only getting started. Our recently announced partnerships with Group M and Electus expand our capabilities in this space . . . We give Electus massive reach but remember we are not trying to mimic traditional TV formats. We are about developing low cost, high quality web content for our users that is created in partnership with advertisers.

Even as Yahoo is shedding “non-core assets,” the company is thinking again about acquisitions. Here’s what Bartz had to say about that subject for 2010:

For us 2010 is about acquisitions and investments to make Yahoo! even stronger. We think about acquisitions in three buckets. The first are the small to medium acquisitions where we acquire important technology and the people behind it. The second is content related where we acquire a company for their audience, content or community. There are a lot of niche sites that have highly engaged users and specialty content that would fit well with our portfolio and our advertiser needs. Third is geographic, where we will make an acquisition to move into or strengthen markets like our deal with Maktoob . . .

So what is ahead for us this year? We are done looking inward. We are looking outward at the incredible opportunities ahead and we are focused on the following areas; Great experiences for our consumers including more social, mobile and video features and improved local content . . .

Canonical, the company behind the popular Ubuntu Linux distribution, revealed today that it has established a revenue sharing agreement with Yahoo. As part of the deal, the Firefox Web browser that is shipped in Ubuntu will be configured to use Yahoo as the default search engine . . .

The change will encompass both the search provider in Firefox’s toolbar and the default start page. Users will still be able to quickly change the default search service by clicking the search provider icon in Firefox and selecting the search service of their choice from the dropdown menu. In order to make it easier for users to switch completely, Canonical is customizing the browser so that switching your default search provider will also change your start page if you haven’t already set one.

Yahoo still has a large number “default search” deals in the mobile arena with wireless operators around the globe. However, it has lost the PC deals it once had to Microsoft or Google in some cases. Acer, I believe, is the remaining major PC OEM to offer Yahoo as the default search provider on its machines (could be wrong). Yahoo is however the search provider on many of its partner sites (e.g., newspapers).

Yesterday Yahoo reported Q4 earnings, which showed a recovery in its display ad business and slightly better than expected results overall. Search advertising was down 15 percent YoY but up 4 percent compared to Q3.

Yahoo CFO Tim Morse said the following about Yahoo’s search business on the earnings call:

Search is an important part of Yahoo! Growing search revenue is a key company priority. We are focused on pulling both the volume and monetization levers to improve results. On the volume side we are using a combination of product enhancements, search oriented marketing spending and the power of the Yahoo! network as a search distribution channel to reaccelerate query volume. On monetization I mentioned the matching technology we recently brought into the marketplace that benefited the RPS. That is just the first step of an aggressive roadmap of monetization enhancements we are executing on.

This is interesting on many levels. It could signal the arrival of a “vertical outsourcing” strategy that moves to other verticals: autos, real estate, travel, local . . . It also seems to represent something a loss for Microsoft. While PriceGrabber has a larger product database than Microsoft there’s probably more than that in Yahoo’s decision not to simply work with Microsoft here, which would seemingly make sense given the search relationship.

Perhaps Yahoo doesn’t want to be too dependent on Microsoft across too many fronts. However, Bing sponsored search ads will be the ones that appear at the top of search results in Yahoo shopping (once the regulators sign off on the deal).

Let’s look at a page. The following represents my speculation about who will provide what going forward:

We’ve reached out to Yahoo for clarification and will update the post once we receive any. However my belief is that Yahoo will retain control over the user experience, search ads will come from Bing (in the future) and the merchant listings (the body of the page) will come from PriceGrabber.

There are also graphical/display ads in shopping. While PriceGrabber has a display ad program I would imagine that Yahoo will retain control over that business, as it has more broadly.

As I said we could be seeing the emergence of a kind of “formula” here for Yahoo in which it outsources data functions to high quality third party specialists and it retains control over display ad sales and look and feel.

This is a huge win for PriceGrabber; Yahoo Shopping is one of the most visited shopping engines online:

Brian Smith has more thoughts and more on what it means for merchants.

Postscript: Yahoo provided the following statement:

At all levels of the company, Yahoo! is constantly exploring ways to improve the consumer and advertiser experience, including aligning products and services against the company’s vision to be the center of people’s online lives. We have decided to enter into a strategic partnership with PriceGrabber to power the Product Submit functionality of Yahoo! Shopping. The partnership will provide users, merchants and advertisers with increased service and support. This partnership will combine the Yahoo! Shopping and PriceGrabber marketplaces allowing merchants and advertisers to gain access to a larger shopper base and users to gain access to even more products. All parties will continue to be a part of the overall Yahoo! experience and now will benefit from increased innovation thanks to the scale and resources this partnership provides. Yahoo! will continue to monetize the site through ad sales and a revenue share with PriceGrabber.

Postscript, January 15: In a post today on the Yahoo Developer Network Blog, Neal Sample, Yahoo’s VP of Open Strategy, says this decision does not reflect any lack of development commitment on Yahoo’s part:

I’ve read the commentary here on the blog and out in the blogosphere. I’ve also read some of the speculation about what this means — and it’s dead wrong. Yahoo!’s commitment to developers and to open platforms is not going away. Not at all.

The 400 engineer transfer is part of the formal agreement between the two companies. In addition, Microsoft is to pay Yahoo  $150 million to defray costs associated with the partnership’s implementation. The Associated Press is also reporting that the $150 payment will likely be accelerated by Microsoft.

Separately, Yahoo CFO Tim Morse told an audience at the recent Barclays Global Capital Technology conference that Yahoo’s search business was getting healthier and that revenue per search were improving, according to PaidContent.

At every turn Yahoo is having to repeat that it hasn’t exited the search business and that the Microsoft deal will be a boon by virtue of its cost savings. However, the departure of so many engineers may have a negative ripple affect across the company’s entire business as it struggles to keep pace with Google and Microsoft across a range of fronts, not to mention Facebook.

Source: Compete.com

Many talented people remain at Yahoo but the company has seen a dramatic brain drain over the past 24 months especially in search. According to comScore, Yahoo has seen its search market share drop from 20.1 percent in May, 2009 to 18 percent in October. The most recent Hitwise data show Yahoo with a lower share.

Yahoo retains the second largest destination on the US Internet, although Microsoft contends that globally MSN is larger than Yahoo:

We’ll see over time whether the end of search R&D at Yahoo and the loss of engineering talent will adversely affect the entire business. My suspicion is that it will and that while it may help boost margins in the near term it will cost Yahoo over the long term as innovation is diminished. I sincerely hope that Yahoo proves me wrong.

Late last year, Acer dropped Yahoo as its primary search provider and switched to Google. HP made Bing (well, Live Search at that time) the default search toolbar on its computers earlier this year. Before you decide that it’s farfetched for deals like this to have a noticeable impact on Yahoo’s search share, consider that the Wall Street Journal estimated earlier this year that losing those two toolbar deals could cost Yahoo 15% of its search traffic.

Bartz also thanked golfer Tiger Woods for helping send more traffic to Yahoo properties. “God bless Tiger” is how the WSJ quotes her. Bartz told the conference that Woods’ recent personal problems have boosted traffic to Yahoo’s sports portal, plus its news, gossip, and home pages.

PaidContent also recaps Bartz’s keynote today, touching on the company’s possible sale of HotJobs, Yahoo’s plans for local, and more. The recap from Silicon Alley Insider covers Bartz’ comments on display ads, video, and content paywalls.

There’s more discussion on Techmeme.

The companies issued this statement:

“Microsoft and Yahoo! believe that this deal will create a sustainable and more compelling alternative in search that can provide consumers, advertisers and publishers real choice, better value, and more innovation.

“Yahoo! and Microsoft welcome the broad support the deal has received from key players in the advertising industry and remain hopeful that the closing of the transaction can occur in early 2010.”

While the deal still faces regulatory approval, today’s announcement means Microsoft and Yahoo can now move forward with their integration plans. Officials in Canada and Australia have already signed off on the agreement.

There’s more discussion on Techmeme.

The Australian Competition and Consumer Commission (ACCC) has published its findings, which say that “the proposed agreement was unlikely to result in a substantial lessening of competition.” The ACCC points to an existing deal in which Microsoft is using Yahoo’s paid search platform in Australia, and says that the two companies’ “share of online paid search advertising queries in Australia was limited.” (Ouch.)

The Canadian Competition Bureau has not yet published its findings, but has apparently notified both Yahoo and Microsoft that it won’t oppose the agreement. The two companies issued a joint statement today which says, in part, “We continue to believe that this deal will create a true, competitive alternative in the marketplace that will benefit consumers, advertisers and publishers. We remain hopeful that the agreement will close in early 2010.”

The Letter Agreement specified that the parties would execute Definitive Agreements by October 27, 2009, but given the complex nature of the transaction, there remain some details to be finalized. The parties are working diligently on finalizing the agreements, have made good progress to date, and have agreed to execute the agreements as expeditiously as possible . . .

On the regulatory front AllThingsD reports that “several sources said, those government approvals are now nearing completion at the Justice Department, even though the Federal Trade Commission might still ask for more assurances on privacy issues related to online advertising and consumer data.” Europe must also approve the deal.

According to the most recent comScore search market share data, the combined reach of MicroHoo search would be 27.9% vs. Google’s 65.4%. Assuming the deal goes through up next for Microsoft would be a decision about whether to attempt to buy Ask, which IAC’s Barry Diller is open to selling, and whether to bid for AOL’s search-ad business when that deal comes up for renewal in 2010.

However a MicroHoo approval would potentially make a later Ask acquisition (or maybe even an AOL deal) harder because it would reduce the number of independent search engines in the market.