Bing Executive Qi Lu: "We’re very happy with the Yahoo partnership"

Yahoo has changed significantly since Marissa Mayer took over the company.  In fact before she became CEO, former Microsoft CEO Steve Ballmer had a deal with then interim CEO Ross Levinsohn wherein Yahoo would turn over its entire search business — patents and all — in exchange for Microsoft’s large online media property, MSN.com, and long-term, guaranteed cash payments.  Within 24 hours of hearing the deal Mayer killed it and fired the executive who had spent months negotiating it.   A few months later rumors came about that Mayer had met with Facebook COO Sheryl Sandberg to discuss the possibility of partnering to create a search engine. Some time later Mayer tried to slow the rollout of its search deal with Microsoft.  Court filings showed Mayer questioned Microsoft’s commitment.  A U.S. judge ended up ruling that Yahoo must adopt Microsoft’s search technology in Taiwan and Hong Kong under their partnership.  Mayer has continued to look for loopholes and recently announced a partnership with Yelp for local search.  Microsoft countered with a strategic investmentwith Foursquare.

Here is a quote critical of monetization from the Bing/Yahoo partnership:

“We need to see monetization working better because we know that it can and we’ve seen other competitors in the space illustrate how well it can work,” Mayer said at an investor conference in February.”

Interestingly enough it turns out Microsoft one quarter Microsoft provided Yahoo $351 million or 31% of their revenue for that quarter.

The company outlined the portion of revenue it gets from a search agreement with Microsoft, following inquires stretching back several months, according to new regulatory filings that were made public yesterday. Yahoo, which had previously said the deal comprised more than 10 percent of sales, said the pact generated 31 percent of revenue in the latest quarter.

Ina Fried got a chance to ask former Yahoo employee Qi Lu, the longtime head of Microsoft’s search and online services, about his partnership with Yahoo.  He was very diplomatic:

‘We haven’t heard a lot about search in a while. We’ve heard that Yahoo hasn’t been very happy with the partnership. Is it critical to Bing’s future to have that Yahoo partnership?

We’re very happy with the Yahoo partnership. We are strongly committed to do what we can to deepen that partnership.

Scale is indeed a critical part of search for both end user experience and search economics. We are focused on getting more value, getting more scale through organic growth but also through partnerships.

The other is our partnership with Amazon. On Kindle devices, Bing is also the search default, and we are getting more and more volume. That’s still early. We see a lot of opportunities to drive more partnerships.

Qi Lu is a fairly skilled interviewee and ultimately said very little.  Legally, Microsoft has little to worry about until renegotiations take place on the search alliance with Yahoo late this year.

A deal with Chinese e-commerce and search giant Alibaba has pocketed Yahoo a few billion.  This allowed Mayer to successfully buy out activist investor Dan Loeb and his board seats.  Money not given to investors has been used on a shopping spree to gobble up start-ups.  Among the largest acquisitions was the microblogging site Tumblr with a billion dollar price tag.  Yahoo still has a large stake in Alibaba and is expected to make billions more from their upcoming IPO.  This is one of the primary reasons Yahoo’s stock has remained relatively high.  

But questions remain as to where Yahoo will find new revenue sources after the Alibaba IPO.  Some analysts believe Mayer’s posturing with Bing is just a ploy to gain more money.  This keeps Wall Street happy for a little longer as she desperately tries to turn Yahoo around.

Source: Recode