Given some of Marrissa Mayers recent comments about the Yahoo/Bing search alliance, you may have believed that the money Yahoo was receiving from Microsoft amounted to a rounding error on the accountant’s spreadsheet. But perception does not appear to be in line with reality as it was revealed today that the revenue from Microsoft accounted for nearly 1/3 of Yahoo’s revenue last quarter! I do not think I am exaggerating when I say that is much more than anyone expected. Yahoo reported that it had $1.139 billion in revenue last quarter (GAAP), which means Microsoft gave Yahoo around $353 million as part of the search alliance.
Yahoo agreed to disclose more details on its revenue tied to search and display advertising after the U.S. Securities and Exchange Commission sent letters to the company asking for clarification. 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.
The data underscores Yahoo’s reliance on the search alliance, which was forged in 2009. Microsoft, which competes with Google in online search, shares revenue from Internet advertising with Yahoo. The Web portal also said it would break out quarterly sales for search and display-based ads for its own properties and from promotions tied to partner sites.
“Since the company and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made,” Patrick Gilmore, accounting branch chief at the SEC, wrote in a letter to Yahoo Chief Executive Officer Marissa Mayer on April 26, according to a filing.
Yahoo’s revenue is under scrutiny from investors as Mayer, who was hired from Google last year, seeks to drive a turnaround to bolster growth. Yahoo said in October that fourth-quarter sales, excluding revenue passed to partner sites, would be $1.18 billion to $1.22 billion, short of analysts’ average estimate for $1.25 billion.
Mayer was successful in buying Dan Loeb out, but I think she’s going to find it much harder to get rid of the Bing deal. Maybe this is just a tactic to get more money from Microsoft when negotiations restart in 2014.