Back to top

Analyst Blog

Yahoo Inc. (YHOO - Analyst Report) and Microsoft Corp. (MSFT - Analyst Report) have renewed their search deal that guarantees revenue for each search made by a Yahoo user using Microsoft’s search engine, Bing. Following the news, shares of Yahoo rose more than 3.00%.

The U.S. revenue-per-search guarantee (RPS) agreement was initially struck in late 2009, renewed in 2011 and expired on Mar 31 this year. Effective Apr 1, the deal has been extended for another year, according to recent SEC filings made by Yahoo. According to the latest agreement, Microsoft will pay Yahoo a minimum amount per search on Yahoo's website.

The partnership is intended to create a competitive front versus Google Inc. , the world’s leading search engine. But the partnership did not turn out as well as expected and resulted in market share losses for Yahoo. The company's revenues declined for three consecutive years before registering a small gain last year.

The deal is Yahoo's first agreement with Microsoft since Marissa Mayer took over as the CEO of the company in July. The extended deal could help the company improve its search revenues going forward. Last quarter, the company’s search revenues were up sequentially due to improvements in the quality of ads, better user experience and new ad products.

Recently, Yahoo signed a global contextual advertising deal with Google, according to which Google ads will appear on various Yahoo properties and certain co-branded sites. This will further help the company improve its search ad revenues.

However, Yahoo still has much to prove, given the growing success of archrival Google and Facebook (FB - Analyst Report). Facebook has become extremely popular with users, so much so that it is already the most popular social networking platform.

The extended deal could have some positive impact and help Yahoo to generate additional dollars as Mayer’s efforts indicate possible improvements in Yahoo’s search and Display business.

Currently, Yahoo has a Zacks Rank #1 (Strong Buy) while Microsoft carries a Zacks Rank #4 (Sell).

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%