Yahoo Extends Microsoft Search Deal & Revenue Guarantees

Yahoo is giving Microsoft a further chance to prove that its search ads really can make Yahoo as much money as promised — at a price. Microsoft has agreed to extend “search revenue guarantees” that it has continually paid since the two companies signed a deal in 2009.

Yahoo Declares An Extension

Reuters spotted the extension as part of Yahoo’s latest quarterly financial filing:

On April 30, 2013, Microsoft extended the RPS Guarantee in the U.S. for an additional 12 months commencing April 1, 2013.

Second Time Guarantee Extended

To translate into plain language, when Yahoo & Microsoft signed a search deal in 2009, Microsoft promised that Yahoo would earn a set amount of money for each search that happens, a “revenue per search” or RPS. If this didn’t happen, Microsoft agreed to make up the difference, what’s called the RPS guarantee.

Microsoft has failed to deliver the expected RPS ever since the deal was signed. It was originally set to expire 18 months after the “paid search transition” from Yahoo to Microsoft had been deemed concluded. But in the fourth quarter of 2011, Microsoft agreed to extend the guarantee through March 31, 2013.

My past story explains more about all this, in depth: As The Yahoo-Microsoft Search Alliance Falls Short, Could A Yahoo-Google Deal Emerge?

That leads to today’s news, that Microsoft has extended the guarantee now a second time, taking it out through March 31, 2014.

Why? Quite simple. If Microsoft can’t deliver, Yahoo potentially can walk away from the deal and go to someone else … like Google.

Will Yahoo Go Google In 2014?

The date to watch is March 31, 2014. If Microsoft fails to deliver for a third time on RPS, Yahoo potentially could abandon the ten year deal. For more on that, see our two related posts:

• Why Yahoo Will Never Reach The “Revenue Per Search” That Microsoft Promised
• Even If Yahoo Wants To Leave Microsoft, Here’s Why It Can’t