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The Yahoo Search Revenue Disaster
Yesterday, Yahoo reported a second quarter of massive declines in its search revenue. Yahoo blamed the “headwind” of paying its partner Microsoft 12% of Yahoo’s net search revenues. Yahoo also said Microsoft’s ads are underperforming. But even without these factors, Yahoo has seen an almost unbroken quarterly decline in search revenues since 2008. Failure is not all down to Microsoft.
POSTSCRIPT: Since I wrote this, I’ve talked with Yahoo. Be sure to read the postscripts that have been added to various sections.
POSTSCRIPT 2 (July 19, 2012): See As The Yahoo-Microsoft Search Alliance Falls Short, Could A Yahoo-Google Deal Emerge? for a follow-up to this post.
Revealed: Yahoo’s Search Revenues Since 2008
Until recently, Yahoo has only provided what I’ll call “Gross Search Revenues” figures, which are how much Yahoo has earned from search-related ads without deducting the cost of paying some partners to carry those ads.
Partner costs are generally referred to as Traffic Acquisition Costs, or TAC. They can eat up a big chunk of gross revenues. For example, let’s say Yahoo ran an ad on its own site. It would (until recently) keep all the money earned by the ad. But if the same ad ran on a partner site, the partner might keep most of the money, say 70%, for an example. Actual amounts vary by partner.
For the last two quarters, during its earnings calls, Yahoo has provided what I’ll call “Net Search Revenue” figures. These come from Yahoo’s “Revenue ex-TAC” charts, which each means revenue that Yahoo has earned less TAC. It’s a better way of knowing how much profit Yahoo’s making off of search.
These new charts provided net search revenue figures for each quarter since Q1 2009. Because these charts also provided year-over-year growth figures, I was able to extract 2008 earnings, as well. Let’s take a look (you can click on the chart to enlarge it):
In 2008, the chart shows that Yahoo was earning about $550 million in net search revenues per quarter. This year also saw the best Yahoo quarter for all the data available, $551 million earned in the second quarter of 2008.
In 2009, there was a plunge. The initial drop could have been due to a typically slower ad period after the busy shopping period surrounding Christmas and other holidays. The global economic downturn was also hitting hard.
The shopping season might also be responsible for one of only two rises in net search revenue that Yahoo has seen over the three year period, in the fourth quarter of 2009.
For its part, Yahoo’s chief financial officer Tim Morse attributed the rise to better ad matching, in the company’s Q4 2009 earnings call:
The primary drivers of fourth quarter performance were improvements to our matching algorithms that yielded better than expected positive results including an 8% sequential increase in global revenue per search….
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
Of course, why that better monetization didn’t keep up in the following quarters isn’t clear. When there was a drop in the following quarter, Morse ran for the “the holidays are over” excuse, in the Q1 2010 earnings call:
O&O search was more of a mix story for the quarter. Year-over-year, revenue declined 14% driven mostly by lower RPS. We’re pleased, however, that the RPS trajectory improved sequentially for the second straight quarter, led by 2% growth in the U.S. That’s particularly significant given that the December quarter is traditionally the strongest for monetization, typically followed by a lower 1Q.
In 2010, Yahoo’s decline continued — and even before Yahoo began using Microsoft’s ads on its US and Canadian sites in the fourth quarter of last year.
Postscript: I’ve since spoken to Yahoo, which makes the important point that in 2010, revenue was down pre-Microsoft also in part because paid inclusion income was no longer coming in (worth $116 million in 2009, before the program was ended). If that income still existed, the pre-Microsoft figures would indeed look better.
Headwinds & The Forked Tail
In the chart above, there’s a split in the line toward the end. Here’s a closer look at that:
Yahoo has been citing the figures shown in red as part of its net search revenue earnings. That makes sense. Those figures do accurately report how much Yahoo is keeping from all the search traffic it generates.
See, 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.
What’s that higher blue line, then? That’s how much Yahoo has earned off of search revenues before paying a slice to Microsoft. To get it, I added back in the amounts Yahoo has reported paying Microsoft (which I detail further below).
The purpose of creating that continuing blue line was to put some perspective on how Yahoo is blaming Microsoft for its search revenue decline. For example, Yahoo makes statements like this in its investor slide decks:
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.
That’s positioned, in my view, to make it seem like these major dips in search revenue are just some natural and to be expected consequence of outsourcing to Microsoft. But when you add the payments back in — effectively calming those “headwinds” — you discover that neither of the last two quarters have shown any growth for reasons that have nothing to do with Yahoo’s outsourcing payments to Microsoft.
Postscript: Again, paid inclusion income would have helped, adding roughly $30 million per quarter.
Blame Your Partner
Of course, Yahoo has an explanation for this, as well. It’s still Microsoft’s fault. Yahoo says that Microsoft’s ads are underperforming, not earning as much money per search as it hoped. Here’s what Yahoo CEO Carol Bartz (pictured on the right) had to say yesterday on the conference call (I’ve bolded the key parts):
The good news is that many of our most important advertisers are realizing a much higher ROI on their campaign in the combined marketplace. We see major financial, auto, retail and customers spending multiples of what they spent with Yahoo! and Microsoft previously because returns have been great.
And some recent third-party reports have reinforced why we did the alliance in the first place. Advertisers CTA and ROI and Yahoo! has improved dramatically. This is good news for advertisers as they seek an alternative for their online search marketing spend.
On the downside, however, adCenter isn’t yet producing the RPS [revenue per search] we hoped for and are confident as possible. Advertisers are seeing strong ROI, but technical limitations in the current adCenter platform mean the click volumes just isn’t there yet. We had expected RPS to be neutral by midyear, it’s now evident that it will take Microsoft longer to achieve that goal. We expect that to happen by year-end. In the meantime, the RPS guaranty helps protect our revenue and our view of the long-term potential of the marketplace remains unchanged.
We are working very close with Microsoft on this. They understand the issues and they’re hard at work on systems architecture, science models and better features and functions in adCenter. They have an aggressive roadmap to bring those to the marketplace.
As Microsoft focuses on RPS improvement in the U.S., we’re holding off on transitioning more page search markets this year. We’ll transition the remaining page search markets once we believe the changes are in place to yield the right results for our advertisers. We are almost ready to begin the rest of the elbow transition.
For my part, I’m pretty dumbfounded. You’d think Yahoo would have been fully confident that Microsoft’s ads would outperform what it was doing itself before transitioning. Otherwise, it made little sense to do the deal in the first place.
One way to be confident might have been to test the ads. Say, in the way Yahoo had tested Google’s ads, when it was hoping to do a deal with Google back in 2008. Instead, Yahoo eventually signed a deal with Microsoft in January 2009. Two years later — that’s like 20 years of internet time — Yahoo’s only now discovering an underperformance problem that it hopes to work out? Seriously?
Actually, Yahoo did test the ads — but pretty late into the game, and after the deal was signed. Still, when Yahoo’s Morse reported on this during the Q3 2010 conference call, all sounded fine: “Our initial tests on Microsoft’s paid search platform are increasing our confidence that once the combined marketplace is fully tuned the RPS uplift will be even greater than originally anticipated.”
Postscript: I asked Yahoo about the testing wasn’t done earlier or didn’t send up warning signs. It said that there’s a difference between testing when people aren’t “full in” so to speak with a system using full budgets. It also said that after the system was fully live in Q4 2010, it didn’t realize the issues were so deep, because holiday spending was masking problems.
Yahoo also itemized some of the key problems with the Microsoft ad system. In particular, it seems to do a poor job of broad matching, allowing ads to be targeted beyond the exact words selected (I’ve heard advertisers say the same).
Another issue is that it doesn’t “smooth” a daily budget across an entire day, which means ads might use all their money for a given day early in that day, rather than showing later.
Yet another issue is that new advertisers coming into the system start with a fresh slate — they have no “quality score” accrued to them, which makes a difference on how well they show. Yahoo’s old system had ways to adjust for this.
But Don’t Blame Yourself
Could there, perhaps, be anything else that might be hurting Yahoo’s search revenues that can’t be pinned on Microsoft? Maybe Yahoo’s not generating as many searches as before?
That wouldn’t seem the case, at least in the way Yahoo tells it. In the latest call, we’re told that search-related pageviews were up 6% in Q4 2010 and 3% in Q1 2011 over the same periods in 2009. Plus, comScore figures are cited to show that Yahoo has increased core searches 34% and 26% for the same periods, over 2009.
So, Yahoo’s apparently doing its job better than ever. It’s just that those searches, even though they’re on the increase, aren’t earning as much revenue as in the past — even in the past when Yahoo itself was running ads. But Microsoft gets the blame.
Lack Of “Real Searches” To Blame?
Let’s talk about those comScore figures. Yahoo’s citing “core search” figures which include things that some wouldn’t consider to be “real” searches. For example, if you view a slideshow in Yahoo News, each click to see a new image is counted as if it’s a search. The article below explains more about this:
This is why in the middle of last year, comScore was compelled to roll out a new “explicit core search” figure, where it excludes things that it doesn’t consider to be “real.” Well, comScore doesn’t put it that undiplomatically, but I will. Again, here’s another article with more about this:
Since Yahoo is citing core search figures — and since I have those going back as far as I have its net search revenue figures — I though these two would go together as well as peanut butter and chocolate. Which is rather well, in my opinion. Let’s have those two great tastes:
The chart is showing net search revenues — the ones before any Microsoft payments were deducted — plotted against the number of “core” searches (in billions) estimated to have happened on Yahoo’s network in the US.
What we see is that well before Microsoft came along, Yahoo had increased the number of searches while its revenue per search kept falling. Keep in mind that this all happened after Yahoo launched its “Panama” ad system in February 2007. That clearly didn’t improve things, which was a big factor that prompted pressure on Yahoo by investors to outsource to either Google or Microsoft.
Even in early 2010, huge spikes in search traffic didn’t seem to increase Yahoo’s search revenues even with Yahoo’s own ads.
Here’s one more chart. This time, I’m showing both “core search” and “explicit search” figures for Yahoo in the US, against net search revenues. I only have explicit core figures back through the third quarter of last year, as that’s when comScore started reporting them:
Remember when I said that some of core search traffic might not include “real” searches? Some of these are what Yahoo calls “contextual searches,” and the company ramped up those type of searches in the middle of 2010. That’s why you see a big rise — heck, record-breaking numbers for Yahoo — during that period.
But those “fake” searches might not monetize that well. Even Yahoo’s Morse said this (he didn’t call them “fake”, of course), as part of Yahoo’s Q2 2010 earnings call:
While not all of these contextual searches, as we call them, monetize at similar levels as traditional search today, overtime, we believe they will. For example, the Trending Now box on our homepage is contributing three times more search volume this year than it did last year, and monetization has improved materially as well. At several hundred million Trending Now searches per month, that’s a big deal. Looking forward, we intend to leverage our strength in both contextual and traditional search to engage users and grow revenue.
To examine this more closely, I created that last chart above to see if there was a huge spike in “fake” searches that might have been driving the drop in revenues. From what I can see, no. Revenues are down significantly in Q1 2011 even though “real” searches actually rose a bit.
This also suggests that all those contextual searches have been doing nothing for Yahoo, other than generating some nice pageview growth figures that don’t contribute to the bottom line.
Postscript: Perhaps the most fascinating part of my call with Yahoo explained that revenue from “contextual” searches is not shared with Microsoft. Clicks on ads from this are deemed to be display-related. That made me wonder why, then, does Yahoo cite the “core search” figures on how well it’s doing in search, when internally, revenue from these “searches” isn’t considered search revenue. Yahoo said that it does also cite “explicit core search” figures in its calls. In addition, Yahoo said that it thinks growth of contextual search is important to talk about because it fuels display ad growth.
Maybe It’s Just That Bing’s Better?
Interestingly, all the attention about Microsoft “headwinds” have glossed over the fact that back in the Q3 2010 earnings call, Morse (pictured on the right) gave another reason for why Yahoo was seeing a decline in its ad revenues. Yahoo’s Bing-powered search results were better than Yahoo’s own apparently sucky listings. So people clicked on the results more, rather than the ads:
Specifically as users experience fresher and more relevant results on Yahoo! search pages powered by Microsoft, they clicked more on the organic results and less on the paid results lowering RPS. This accounted for the majority of the revenue difference relative to our expectations. We also noted a search page view decline as users found what they needed faster, and therefore clicked through to the next page of search results less often, lowering volume.
Despite the unfavorable revenue impact in the third quarter, the user experience is clearly better, and we’re confident that will lead to longer term volume and market share improvements.
This is really important. It was a relatively minor drop from Q2 2010 ($438 million in net search revenue) to Q3 2010 ($428 million). When Yahoo had the big drop from Q3 to Q4 ($388 million), it screamed “headwinds.” But the quarter-to-quarter drop, when you look at net revenues before the Microsoft payment was made, is still minor ($428 million to $420 million).
Was it — is it? — really that searchers just continue to be happy with better results?
Back To The Headwinds
One of the things that fascinates me most about the plunging revenues is Yahoo’s explanation that this is all “headwinds” that it and its investors have to endure, a 12% cut of its revenues that’s being positioned as a sort of “new normal” that should have been expected. I don’t recall this being said when the deal was being done.
Nope, back then, it was all supposed to be that Yahoo would save money by plugging in a “Bing chip” and still earn plenty off of search. As Morse said in the Q3 2009 earnings call:
Not only will our agreement not only allow us to continue to generate search revenue but more importantly we’ll continue to innovate in the search experience. The next revolution isn’t with the algorithms that provide results, it’s in creating a better, more personally relevant search experience. This is where we’ll differentiate ourselves and compete vigorously without the billions required to keep up in the arms race that generating search results has become.
Let me give you an analogy that Carol has been using to explain this point. Consider basic search to be an Intel chip. An Intel chip is used in Dells, HPs and Macs to provide the computation needed to operate them but the differentiation between these products isn’t at the chip level, it’s in the different user experiences that are provided on top of them. It’s the same for us in search. We’ll innovate on top of the results that are provided to us by Microsoft.
No mention of headwinds there. But by Q3 2010, Morse is saying on the earnings call to buckle up for stormy weather throughout 2011:
Well, I would say that obviously the 12% revenue share is a headwind that we’ll obviously throughout most of the 2011. Thereafter, obviously the comps get much easier. As you look at it I think what we plan to do is grow both volume and RPS.
We have a certain mid-single digit RPS uplift baked into our modeling that we’ve talked about previously. We’re starting to feel certainly better at initial testing that that could be more, so we feel good about that.
I’m not going to go out and say how long it will take us to overcome the 12% but over the period, we’re clearly, clearly aiming to grow search revenue. I mean that’s one of the big reasons we did this deal. It’s RPS uplift from the bigger in more liquid marketplace and we’re innovating like crazy on search to improve volume. We feel good about both of those.
Wasn’t Outsourcing Going To Save Money?
So far, Yahoo has paid out $32 million in Q4 2010 and $36 million in Q1 2011 to Microsoft’s 12% cut. But what Yahoo doesn’t seem to be saying is what it has gained in other areas to offset this.
Remember, by outsourcing to Microsoft, Yahoo was supposed to be saving overhead on search. Giving up 12% of net revenues was positioned as a nobrainer, since it was going to save so much.
Let’s go back to the deal’s press release:
At full implementation (expected to occur within 24 months following regulatory approval), Yahoo! estimates, based on current levels of revenue and current operating expenses, that this agreement will provide a benefit to annual GAAP operating income of approximately $500 million and capital expenditure savings of approximately $200 million. Yahoo! also estimates that this agreement will provide a benefit to annual operating cash flow of approximately $275 million.
There’s like a billion dollars worth of benefits promised in there, nearly $800 million promised on an annual basis. How on earth are these $30 millionish payments not being offset by all this?
$90 Million In Cost Savings Aren’t Offsetting $30 Million “Headwinds?”
Indeed, the headwinds should be pretty neutralized, as best I can tell. Back during the Q1 2010 call, Morse talked about the money that Microsoft was paying Yahoo to cover Yahoo’s search-related expenses, until Microsoft could fully take over:
Now I’ll move to the $35 million in operating reimbursements. Since we received regulatory clearance and began implementation on February 23, Microsoft has been responsible for the costs of running our paid and algorithmic search platforms. Until we move to their system, Microsoft will be reimbursing us for specific search operating expenses. As you build your own financial projections, understand that the $35 million represents the first evidence of the ongoing savings we anticipate from executing the search alliance.
In total, last year, Yahoo received $268 million from Microsoft to cover the cost of running search. From Yahoo’s 2010 annual report:
Our results for the year ended December 31, 2010 reflect $268 million in search operating cost reimbursements from Microsoft under the Search Agreement. Search operating cost reimbursements will continue until we complete the transition to Microsoft’s platform in all markets. Search operating cost reimbursements are expected to decline as we fully transition all markets and the underlying expenses will no longer be incurred under our cost structure following completion of the transition and the amounts saved will be available for reinvestment.
Each quarter last year, Yahoo talked about this money. Here’s the typical slide from the Q4 2010 deck:
The first arrow points to Yahoo saying that it costs about $25 to $30 million per month (or about $75 million to $90 million per quarter) for it to run search. The second points to a call-out that highlights how each quarter, Micrsoft’s payments have been saving Yahoo this operational money.
These payments weren’t mentioned in the latest call. Perhaps that because with the US and Canada online, there’s relatively little search operation left that Yahoo is running directly, for which Microsoft needs to reimburse it for.
But the bottom line is this. If it was costing Yahoo so much (up to $90 million per quarter) to run search in-house, why on earth isn’t it positioning that $30 million or so that it’s now paying to Microsoft to outsource search as a tailwind, rather than a headwind? Outsourcing should be a huge savings for the company. If it is, position it that way now.
Postscript: Yahoo said that it is indeed saving money. “Without question, we’re net positive on the profitability of search,” Marta Nichols, vice president of Yahoo’s investor relations, told me. The cost savings aren’t well positioned in terms of search, she agreed. But they are reflected in Yahoo’s overall cost savings — and that’s something investors in general are excited about.
I’ll be coming back to this in a future piece. It’s something I think of as the “Yahoo Search Dividend,” and it’s not well reflected in the isolated search revenue figures. Ideally, you’d want a search profitability figure that could show how much overall profit that Yahoo is making from search.
This is difficult, because Yahoo always has some core costs it has to cover. But the bottom line is that while search revenues have dropped, Yahoo has also been taking in $30 to $90 million per quarter in money to reimburse it for the cost of running search — costs that before the deal, it would have had to cover itself. Last quarter, it received $57 million.
The Revenue Guarantee
Microsoft is also on the hook for up to $150 million of “transition cost reimbursements” as part of the deal. Again, while these were mentioned all last year in earnings decks, I didn’t see this come up in the latest one.
I suspect it’s because Yahoo’s done getting money from this source. As of Q4 2010, it had been reimbursed for a total of $124 million. That leaves only $26 million left that it can get from Microsoft — and since it was clocking up about $20 million per quarter, my guess is that it billed for around that amount in Q1 2011 and doesn’t see a reason to keep reporting this item now, since the income is likely gone.
Far more interesting is the revenue guarantee that Yahoo has. From yesterday’s call, as Morse explained:
Although O&O RPS underperformed our original expectations, we were protected financially by the RPS guarantee for Yahoo! properties. With the guarantee, O&O RPS was flat globally versus last year. The guarantee extends for the next 4 quarters as well so we’re comfortable with the financial floor we’ve established while Microsoft implements operational improvements in the joint marketplace.
I’ll translate. “O&O” means search sites that Yahoo owns and operates. RPS is “revenue per search.” Microsoft guaranteed that Yahoo would earn a set amount for 18 months — or 6 quarters. Two of those quarters have passed, and Microsoft has paid out to match the guarantees. But how much?
We don’t know. No one has ever said, that I’ve seen. There’s a “baseline” that Microsoft has agreed to, but that’s never been made public.
How Much? Maybe $10-$25 Million?
Still, I did some work yesterday poking at numbers, and I suspect that it’s probably worth around $10 to $25 million per quarter, at most. To date, I’m virtually certain that the guarantee has kicked in $29 million over the past quarter.
|Quarter||Q4 10||Q1 11|
|Net Search Revenues, Before Microsoft Payment||$420||$393|
|12% Owed To Microsoft||$50||$47|
|Amount Actually Paid To Microsoft||$32||$36|
|% Actually Paid To Microsoft||8%||9%|
See, Microsoft is supposed to get paid 12% on net search revenues, but it really has only received 8-9%. The difference is how much I think Yahoo is being given as part of the guarantee.
In my work yesterday, I though this might all be linked to how much net revenue had been earned for a particular quarter versus the same quarter in the prior year. I might be off-base, and I was working with net revenue figures that also included non-Yahoo owned and operated sites. But these were my best guestimates.
Only Microsoft and Yahoo know for certain. But from the past two quarters, it’s clear that Microsoft isn’t paying out that much. It’s also not going to be likely paying that much more for the coming year.
Postscript: Yesterday around 6:30PM Pacific Time, I’d emailed Yahoo a number of questions relating to the precursor to this story, which I wrote yesterday. I didn’t hear back before publishing this follow-up story, but I didn’t expect to, given that this went out around 8am Pacific Time the next day.
Around Noon Pacific Time today, I received a short email that didn’t really answer much of what I’d asked. Rather, it just restated much of what was said on the earnings call.
Around 3:30 Pacific Time today, I got a call from Yahoo asking to talk more through some of the numbers. That’ll probably happen tomorrow, and I expect a follow up piece will come from it.
I asked if there was anything in particular that was wrong in the figures I’d cited above, and nothing specific was called out other than that Microsoft doesn’t have to pay 12% on all the net search revenues yet, since some of those revenues are being generated from outside the US and Canada.
That’s one reason why you see those 8%-9% figures above. However, I already knew there were some unacccounted for factors, since the net search revenue figures also include some non-Yahoo owned and operated sites, as I stated.
Anyway, hopefully I’ll be able to shed more light on the payments and related matters after the call.
Postscript 2: Yahoo says it is guaranteed 100% of RPS of whatever was earned on its owned and operated sites — where Microsoft has taken over — based on the previous year’s around.
In plain English, with some example figures. Let’s say that Yahoo earned $100 on its US site, $25 from US-partner sites and $50 from its European sites in Q1 2010. In Q1 2011, it earns $75 on its US site, $15 on US-partner sites and $40 on European sites.
Microsoft has to pay Yahoo the difference only on the US site, since that’s owned and operated by Yaho0 and has been fully shifted over to Microsoft’s ads.
What’s It All Mean?
In the end, I come away with — and sorry to say it — not a whole lot of faith in what Yahoo’s been saying, much less the grand master plan that outsourcing to Microsoft was going to save its search business.
Yahoo still has substantial search traffic, but it remains dwarfed by Google while Bing has been closing the gap. Below are comScore’s “explicit core search” figures for the US, over time:
But even with the growing traffic (if that keeps up), search-related revenues are heading south. And going through all the conference call transcripts, all you ever seem to hear from Yahoo’s execs are excuses — sometimes conflicting ones — about why search is performing so badly. It doesn’t give much faith they know what’s happening or how to really fix anything.
Yahoo doesn’t have to win the search share battle to necessarily be successful in search. It could still play the game Ask.com does — invest relatively minor amounts and tap into residual traffic as a profit center for as long as possible.
The decline in search revenue also doesn’t mean that Yahoo as a company overall is a bad investment. Other operations may offset search; not hosting a search infrastructure may allow Yahoo to do other things.
But there’s no doubt that Yahoo’s not in the driver’s seat on search. It’s having to pray that its partner (which is also a chief competitor) will fix things to boost its revenue. If that doesn’t happen, what Microsoft has to pay out seems like pocket change — heck, Microsoft might spend more to run its Bing ads on TV.
The search revenues need to reverse themselves, and quickly, for Yahoo to be convincing that the deal it hawked is really paying off. Otherwise, when 2012 rolls around, and those headwinds have finally slacked off, Yahoo might find it has slowed down to earning Blekko money.
POSTSCRIPT 2 (July 19, 2012): As The Yahoo-Microsoft Search Alliance Falls Short, Could A Yahoo-Google Deal Emerge? covers how the Yahoo’s been unable to close the revenue per search gap over the past year and seems unlikely to, under the deal.
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