Mittlerweile benutzen fast 10 Millionen Nutzer in Deutschland regelmäßig Bing, das sind 20 Prozent der aktiven Internetnutzer hierzulande.

According to several third-party sources, Bing’s market share is smaller than the 20 percent figure cited above. For example, the following is StatCounter’s search engine data for Germany:

Source: StatCounter

NetMarketshare generally agrees, showing Bing’s PC search share at just over 2 percent.

The combined Bing-Yahoo “search alliance” share in the US is about 30 percent. However the search alliance has considerably less reach in Europe. While the organic-results merger was completed last year, Microsoft adCenter is just now rolling out in Europe.

Related Entries

• Search Alliance Begins First AdCenter Testing In Europe
• December “Explicit” Search Numbers: Bing Now Ahead Of Yahoo
• Report: Google Controls 44 Percent Of Global Online Advertising
• Bing, Yahoo Now Neck & Neck In US Search Market Share

The first testing for the roll-out will commence mid-January and may involve up to 10% of Yahoo’s traffic in these geographies. Microsoft suggests advertisers closely monitor campaigns and be prepared to increase budgets if they’re more than 80% depleted. Testing and adjustments will continue until the companies are ready for a full roll-out, which is expected to be in the second quarter.

North American advertisers and publishers were transitioned to adCenter in 2010 and a new combined search marketplace was launched in India last September. In November, Microsoft said it was ready to begin expanding to Europe.

The algorithmic change — having Bing organic results serving on Yahoo properties — was accomplished (except for in Korea) last year.

Microsoft said, the “European roll out is scheduled to begin with the UK, Ireland and France in the second quarter of 2012.”

Yahoo and Microsoft have already transitioned the search ad technology in the U.S. and Canada, as well as some other regions. But the transition scheduled slowed as revenue figures did not meet estimates and advertiser expectations were poor.

Yahoo and Microsoft has completed the organic transition less than a month ago. The only migration left is the organic Korea region and much of the paid search and publisher transition.

To stay up to date on the UK transition, watch searchalliance.com/uk for updates.

Related Stories:

• Yahoo Completes Global Organic Transition To Bing (Except Korea)
• Yahoo Asia & More European Properties Transitioned To Bing Powered Results
• Yahoo UK & Others Switching To Bing Organic Results August 3rd
• Yahoo Begins Testing Bing Powered Results This Month
• Yahoo Search Advertisers Can Now Begin To Migrate Accounts To Microsoft adCenter
• Yahoo-Microsoft Organic Transition Happening, Site Explorer, Search Monkey Holding For Now
• What’s New With Bing & Yahoo Search Alliance
• Official: Yahoo’s Results Now Come From Bing

Revenue excluding traffic acquisition costs (“revenue ex-TAC”) was $1,076 million for the second quarter of 2011, a 5 percent decrease from the second quarter of 2010, primarily due to the revenue share related to the Search Agreement with Microsoft . . . GAAP revenue was $1,229 million for the second quarter of 2011, a 23 percent decrease from the second quarter of 2010, primarily due to the required change in revenue presentation related to the Search Agreement and the associated revenue share with Microsoft.

This was the sixth successive quarter in which search revenues had declined. However Bartz cited incremental progress and improvements in search performance, as well as coordination with Microsoft on addressing “technical limitations” or gaps in adCenter that prevent the full monetization of search queries.

Here’s some of what Bartz said about “revenue per search” on the earnings call yesterday:

As we discussed last quarter, RPS is below the expectations we have for the alliance due to technical limitations in Microsoft’s adCenter platform. The alliance has worked aggressively to implement a plan to address these issues. Working together, Microsoft and Yahoo! have uncovered and addressed several platform gaps and inefficiencies in the adCenter marketplace. With a lot of collaborative work and planning, Microsoft systematically launched many new capabilities throughout Q2, including improvements to campaign budgeting features and click prediction models.

These launches are improving the monetization of paid search results and lifting RPS on both Yahoo! O&O and Affiliate sites . . . We’re really pleased with our improvement. Additional initiatives to improve the adCenter platform have been identified, and hence, are scheduled to launch throughout the year . . .

Display advertising, Yahoo’s core strength, was also mixed or soft. Display revenues increased outside the US but were flat in the US market. This was blamed largely on structural and personnel changes in the sales organization, which Bartz now says are stabilizing.

Competitive pressure on Yahoo is increasing, which is not good news for the company’s display business. According to a forecast released last month by eMarketer, Google will challenge Yahoo’s position in US display next year.

Currently Facebook serves more display impressions than any other site in the US market. Facebook will control 19.4 percent of US display revenues to Google’s 12.3 percent and Yahoo’s 12.5 percent in 2012, according to eMarketer.

For the past few years Yahoo has been in what feels like a perpetual transition — in one way or another. Some of this is understandable but board members and investors will ultimately run out of patience, especially when Google earlier in the week posted a $9 billion quarter.

Yahoo has always suffered by comparison to Google’s revenue growth and performance.

Bartz was confronted by unhappy shareholders at Yahoo’s June investor day. And there have been numerous rumors in the past several months that a new CEO search was being considered by the board. It seems increasingly clear that Bartz needs a solid win relatively soon — Yahoo is supposedly in talks, among others, to buy Hulu — to salvage her position.

The move is another small step away from search for Yahoo, begun in earnest when the company announced its alliance with Microsoft in July of 2009. (Danny Sullivan even wrote a eulogy for Yahoo search at that time.)

Though Yahoo’s sales team still handles premium search marketers — likely many who are also customers of its display business — Microsoft now owns the interface, adCenter, through which many search marketers buy on Yahoo. In fact, most of the content on the Search Marketing Blog in recent months, when there has been any, has been oriented toward helping folks transition their accounts and campaigns over to adCenter. With that mission accomplished, the blog is going dark.

[The decline was] primarily due to the required change in revenue presentation related to the Search Agreement and the associated revenue share with Microsoft. For transitioned markets (U.S. and Canada), Yahoo! now reports revenue associated with the Search Agreement on a net (after TAC) basis rather than a gross basis. Excluding the impact of these two items and the impact of the divestitures of Zimbra and HotJobs, broadband deferred revenue amortization, and certain fee rate reductions, revenue for the first quarter of 2011 decreased 8 percent compared to the first quarter of 2010.

Display revenue increased 10 percent but overall search revenue was down 19 percent (or more depending on the accounting methods used):

• Display revenue ex-TAC increased 10 percent to $471 million, compared to $427 million for the first quarter of 2010.
• GAAP display revenue increased 6 percent to $523 million, compared to $491 million for the first quarter of 2010.
• Search revenue ex-TAC was $357 million, a 19 percent decrease compared to $440 million for the first quarter of 2010.
• GAAP search revenue was $455 million, a 46 percent decrease compared to $841 million for the first quarter of 2010.

Here’s what Yahoo said specifically about “Search Alliance Costs and Reimbursements”:

Yahoo!’s results for the first quarter of 2011 reflect $56 million in search operating cost reimbursements and $11 million in transition cost reimbursements from Microsoft under the Search Agreement, which amounts are equal to the search operating costs and the transition costs incurred by Yahoo! in the first quarter. Search operating cost reimbursements are expected to continue to decline as Yahoo! fully transitions all markets to Microsoft’s search platform and the underlying expenses are removed from our cost structure. Our business outlook for total expenses reflects these anticipated savings. The net impact of the transition costs and transition cost reimbursements were neutral to total operating expenses in the first quarter, as expected.

Here are some of the earnings slides:

The search deal with Microsoft may have saved some costs for Yahoo but it has yet to bear fruit as promised when the search alliance was formed. Yahoo has some bright spots in display but otherwise it seems a company very much stuck in neutral.

Postscript From Danny Sullivan:

I generally don’t dive deep into our earning calls coverage, but the news of Yahoo having a drop of search revenues certain caught my ears. So, I’ve gone through the earning slides myself. A few questions and observations.

NOTE: You can read the section below, but I’ve also turned this into a more organized stand-alone article: The Yahoo Search Revenue Disaster.

“Contextual” Queries Don’t Earn?

First, there’s this metrics chart:

That’s all pretty rosy sounding. Search-related pageviews are reported as up over the past two quarters, first a 6% rise for the fourth quarter of 2010 compared to the same quarter in 2009, then a 3% rise for the same year-to-year comparison for the first quarter of 2011.

Search queries are also said as being up — double-digit rises, even.

So what gives with all these views going up but search revenues being down? I’d bet that the “contextual” searches that Yahoo has manufactured to generate pageviews that look good on paper aren’t doing the same for revenues.

The pageview figures are Yahoo’s own. The search queries come from comScore. But these are “core search” queries from comScore, not “explicit core search” queries that comScore also provides — and which exclude some of Yahoo’s manufactured searches, things such as where going through a slideshow in Yahoo News generates a new “search” on each click.

The articles below provide more information about this:

• Time To End The Bull Search Engine Share Figures?
• Q&A: comScore’s New “Core Search” & “Explicit Core Search” Figures

Search Revenues Down

Next, look back at that “Revenue ex-TAC by Source” chart above. I’ve pulled out just the search revenue-related figures to make a new chart from that, below:

The bars show the total amount of search revenue earned in each quarter, excluding any payments Yahoo owed partners in relation to generating this revenue. These payments are called “traffic acquisition costs” or TAC, in short.

The percentages above each bar show how much revenue dropped in that quarter versus the same quarter for the previous year. It’s all bad news. Yahoo tries to paint the last two quarters as merely “headwinds” caused by new payments it makes to Microsoft in relation to outsourcing its search services. Microsoft gets 12% of Yahoo’s search-related revenues.

Part of this seems correct. Last quarter, Yahoo says that it paid Microsoft $36 million off the net search revenues it earned. IE, in Q1 2011, Yahoo earned net search revenues of $357 million, but this was less the 12% it owned Microsoft on search revenue earnings. Before those were taken, it had earned (apparently) $393 million.

Hang on to that figure $393 million figure. I’ll be coming back to it. Yahoo didn’t report what Microsoft got for Q4 2010, but given the drop, it seems likely similar.

The problem with the drops is that Yahoo’s deal was supposed to let Yahoo keep earning as much — if not more — than ever before despite Microsoft’s skimming off the top. That’s how Yahoo pitched the deal. It would allow Yahoo to keep earning plenty on search, because Yahoo argued that search technology itself was just a “chip” that it could plug-in.

By borrowing Microsoft’s “Bing chip,” Yahoo would lose tons of cost involved with making that chip but still enjoy plenty of revenue. These figures paint a picture of that not being the case. The opposite, actually — thanks in part to the Microsoft-Yahoo deal, Yahoo’s earning less off search than ever before.

Microsoft Payments Aren’t TAC Payments

Keep in mind this important point. Microsoft gets 12% of search revenues after TAC has been deducted, not before. Yahoo’s earnings talk about reporting revenues on a new “post-TAC” or “net” basis. That gives the impression that Microsoft’s cut is somehow new, slicing further into revenues.

Well, it is new. But it’s not a TAC cost — payments that Yahoo makes to various distribution partners. Instead, it’s a payment that Yahoo makes over and beyond those other payments.

That leads to another chart I’ve made from the Yahoo earnings deck:

This is how much Yahoo has paid in traffic acquisition costs related to search. In other words, in the first quarter of 2010, Yahoo made $841 million in search revenues but paid $401 out to various partners in relation to deals to generate those revenues. That’s what the first bar shows, the $401 paid out, which was 48% of everything it earned. That’s what the percentage shows.

Something big happened in the last quarter. Yahoo’s search-related TAC massively dropped. What this was isn’t clear. I’m checking on it. It suggests that Yahoo has lost a major distribution partner (or two) that, despite costing a lot, was sending traffic that monetized very well.

Microsoft & Guaranteed Revenue

Under the terms of the deal, Yahoo is guaranteed a certain amount of revenue by Microsoft from when the deal starts. How much? I’m checking to see if I can get any solid figures. This is from what we originally reported on Yahoo-Microsoft deal, when it was announced back in July 2009:

Yahoo is guaranteed to receive payments for the first 18 months of the deal to match a “baseline” of what it was earning before the deal starts, we were told. How far back does the baseline go? We couldn’t get details on that.

The payments are even more important to know now because they might be masking even bigger drops with Yahoo is having with search revenues. Clearly, something type of “rebate” is happening already. Consider these figures from the most recent quarter:

1. Net search revenue, post Microsoft = $357 million
2. Payments to Microsoft = $36 million
3. Net search revenue, before Microsoft = $393 million

OK, (1) is the figure that Yahoo gave for net search revenues. As for (2), this is how much Yahoo said it paid Microsoft on net revenues, an amount that was deducted before the $357 million shown. As the Yahoo slide deck says:

YOY Growth in Search revenue ex-TAC $ and Total revenue ex-TAC were negatively impacted in Q1’11 by $36M and $63M in headwinds, respectively.

Got it? That’s Yahoo saying it earned $357 million and that the “headwinds” of paying $36 million helped produce that low $357 million amount. The $36 million came off the top, producing that final figure.

That’s where (3) comes in, the net search revenue that was paid before Microsoft. And that leads to these figures:

1. Net search revenue, before Microsoft = $393 million
2. 12% of net search revenue owned to Microsoft = $47 million
3. Amount actually paid to Microsoft = $36 million
4. Unaccounted for = $11 million

Why didn’t Yahoo pay Microsoft $47 million, rather than $36 million? I think the $11 million is a form of a rebate — that Microsoft promised that Yahoo would earn a certain amount, and if it fell short, it would deduct from what it was owed.

I did the same thing for Q4 2010 and found an $18 million gap. Yahoo paid Microsoft $32 million, but should have paid $50 million.

Here’s what I think is happening, after playing with a bunch of numbers and scenarios.

I believe Microsoft promised Yahoo that it would earn in any quarter about 92.5% of what it earned for that same quarter the year before. If it didn’t, then Microsoft would pretend that Yahoo earned that much and rebate an amount from its own share.

Here’s my figuring:

• Q4 2009 net search revenues = $473 million
• 92.5% of Q4 2009 as Q4 2010 baseline = $438 million
• Q4 2010 net search revenue, pre-Microsoft payment = $420 million
• Difference = $18 million
• 12% of Q4 baseline owed to Microsoft = $50 million
• Actually paid to Microsoft = 32 million
• Difference = $18 million

See? Microsoft guaranteed that Yahoo would earn at least 92% in Q4 2010 of whatever it earned in Q4 2009 — that that Microsoft would get 12% of that figure, or $50 million. But if Yahoo fell short, Microsoft would deduct whatever the difference was from that share. Yahoo fell short by $18 million, so that $18 million came out of the $50 million Microsoft would have earned.

Here it is again for the most recent quarter:

• Q1 201o net search revenues = $440 million
• 92.5% of Q1 2010 as Q1 2011 baseline = $407 million
• Q1 2011 net search revenue, pre-Microsoft payment = $393 million
• Difference = $14 million
• 12% of Q1 baseline owed to Microsoft = $50 million
• Actually paid to Microsoft = 36 million
• Difference = $14 million

Alternatively, it might be that Microsoft guaranteed that Yahoo would earn at least enough in net search revenues to pay Microsoft $50 million per quarter — and that if it didn’t, Microsoft would pay Yahoo any difference. That sure makes the calculations easier.

Yahoo looks to get four more months of this type of guarantee for four more quarters, reports AllThingsD.

Blame Microsoft, Says Yahoo

A final puzzling part for me revolves around the blame game that Yahoo’s doing. Why are its search revenues down? Aside from what it now has to pay Microsoft, it says that Microsoft’s ads aren’t working. From the Wall Street Journal live blogging:

The first quarter was “a mixed bag” for search. The good news, Ms. Bartz says, is that many of Yahoo’s most important advertisers are seeing much higher return on investment and thus spending more. But she takes Microsoft to task for technology problems. “It will take Microsoft longer to achieve the goals” that the companies have, she said, saying revenue per search should be back up where it used to be by the end of the year….

So there’s a weird situation in this deal with Microsoft: Some advertisers are apparently benefiting a lot from the new service, which seems to contradict the news that something is wrong with the technology. Microsoft’s ad tool “doesn’t have a good handle on” how to serve new ad buyers, Ms. Bartz says. So existing advertisers do well in the new system, but “many of the new advertisers can’t even get their campaigns in,” Ms. Bartz says.

OK, but the Microsoft ads went on Yahoo’s site back in October. Yahoo talks about the deal being in full effect from October. We know the Microsoft ads themselves started at the end of October. So why wasn’t Q3 2010 so down? Why did at least two months in that quarter work out just fine, then all the months after that have been trouble-ridden?

Well, I’m checking with Yahoo about this and some related questions. I’ll report back on what I learn.

Postscript: See our follow-up story, The Yahoo Search Revenue Disaster.

The Answer Is Out There

Seth said to me that for about 50 percent of the top queries on the web there is a “definite answer” and that Yahoo will strive to provide that within Search Direct. In other contexts it will provide a range of choices to users.

Seth predicted  that “in a couple of years we may walk completely away from the SERP as we know it.”

It struck me, however, that Yahoo was not eliminating the SERP but shrinking and compressing it down to this miniaturized  format. Seth didn’t disagree with my characterization.

Search Direct Will Look Different on Tablets

Seth clarified that when expressed on tablets or mobile devices it could take very different forms. He suggested for example that on a tablet there might be a much more “magazine-like” experience. He said they’re experimenting with different UIs and content presentations now.

I asked about the algorithm. During the press event Yahoo said that this was an algorithm distinct from Microsoft’s organic search algorithm.

Seth told me that right now the links and content being shown in the right part of the box are the URLs that are the “most clicked” throughout the Yahoo network. He also implied that it might get more nuanced over time. And he added that rankings can change moment to moment because it’s dynamic.

Search and Display Hook Up

We also spoke briefly about the advertising angle here. Shashi Seth said that Yahoo’s agency and brand advertising partners have been very intrigued and excited about bringing more brand advertising to search. He said that there are some discussions going on now and that in a few months Yahoo users would see the results as ads roll out.

Seth made the larger point that Search Direct represents the convergence of search and branding and of search and discovery. Yahoo is trying to provide specific answers, as well as expose adjacent and related content.

It’s both “push” and “pull.”

Yahoo Instant Search Take Two

Irving then moved on to the main event: Search Direct. The simple way to describe it is as Yahoo’s version of Google’s Instant Search but with richer content. It’s intended to apply to both the PC and mobile experiences (including tablets).

Irving reminds the audience that Yahoo developed a version of Instant Search years before Google (though Google Instant isn’t named). He argues that this is “much richer, much faster” than . . . the leading brand (my words).

Irving reiterates that Yahoo “cares deeply” about search. The Search Alliance frees Yahoo up to innovate around the user experience. Here’s a image of Search Direct, which is live now.

Answers Not (Instant) Links

Head of Yahoo Search Shashi Seth says this will help totally change the landscape of search. This is “the first stop in that journey.” He launched into a rapid-fire demo of Search Direct, which provides the speed of Google Instant — Yahoo claims it’s faster — but with more information (“Answers”). It includes rich results in the expanded query box.

Seth boldly stated that this represents the “next generation of search.” He explained that Search Direct has been in testing with users since late last year. Users search more and are more engaged with Search Direct than conventional Yahoo search, according to Seth.

Here are some additional Search Direct screens provided by Yahoo:

Separate Index, Separate Algorithm

Shashi Seth told the group that this product is running a separate index (a “significantly smaller index” culled from the Microsoft index) and a separate algorithm. Everything is on Yahoo’s servers today.

There’s more to be explored around what Yahoo is doing technically (see this Yahoo blog post). But Seth briefly described this as Yahoo’s “real-time index,” which is being updated every 5-10 minutes.

Search Direct is operating in 15 main categories but will expand to “hundreds.” Seth told the audience that the structured data being presented will become increasingly “deep.” Today the categories available to Search Direct include: news, sports, movies, weather, local, celebrities and several others. But they will expand over the course of the year.

New Ad Opportunities

He also discussed advertising in/on Search Direct, which will be rolling out over the next few months. He said that sponsored and branded results will appear in the box as well.

Clearly this is going to be a search + display (including video) opportunity for Yahoo.  It may also be exported to Yahoo partners and third party sites. Seth said that Yahoo wants to “allow other publishers to play in this ecosystem.” Seth said that Yahoo wants to syndicate the experience, “That product doesn’t exist today but we’re starting to think about it.”

He added that Search Direct will roll out across Yahoo in the next “couple of months.” Today it’s only available in the US but will be introduced into international markets later this year.

Got Patents?

Blake Irving suggested that Yahoo owned patents on Instant Search. When questioned about whether Yahoo would seek to enforce patents or seek licensing revenue from Google he deferred to Yahoo’s “legal team.”

Below is a video that demos and explains Search Direct.

The company says that the transition led to small drops in click share and spend share, and a larger drop in overall paid search ad impressions for Yahoo-Bing. But, the flip side of that was a gain in revenue-per-click (RPC).

Efficient Frontier says revenue-per-click on Yahoo-Bing used to be about 20% lower than on Google, but the two are even now (as shown above). As the chart shows, Yahoo-Bing have seen a moderate increase in RPC, while Google’s dropped in the 4th quarter.

The company also says advertisers on Yahoo-Bing saw better ROI than expected, and the combined platform is providing ROI that’s “about the same as Google now.” Because of that increase in ROI on Yahoo-Bing, cost-per-click there was essentially the same as Google by the end of 2010.

The transition tool inside your YSM account will permanently close on January 5, 2011. Accounts that are not transitioned by January 5 can only be manually transitioned by exporting and importing campaigns into the adCenter UI.

Yahoo says you’ll know you haven’t yet transitioned accounts if you still see an “adCenter” tab with a yellow “Get Started” button in your Yahoo account.