Relatively quietly Yahoo has decided to outsource most of Yahoo Shopping to PriceGrabber. This is analogous to what Yahoo is doing with Microsoft-Bing in search — just not with Microsoft. Merchant listings will now come from PriceGrabber and e-commerce sellers will only be able to get into Yahoo Shopping via PriceGrabber or Yahoo Search (Bing).

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.

Related Topics: Top News | Yahoo: Partnerships | Yahoo: Shopping

About The Author: Greg Sterling is a Contributing Editor at Search Engine Land. He writes a personal blog Screenwerk, about SoLoMo issues and connecting the dots between online and offline. He also posts at Internet2Go, which is focused on the mobile Internet. Follow him @gsterling. See more articles by Greg Sterling