Yahoo turns to mobile, advertising following Microsoft deal

Web services giant Yahoo said it will shift its focus to mobile services technology, display advertising and content after selling its search business [1] to Microsoft. In an interview with The New York Times, Yahoo CEO Carol Bartz said she agreed to sell the firm's search business to Microsoft because Yahoo could no longer continue to match the level of investment Google and Microsoft were making in their respective search efforts. Bartz adds that the reduction in search-related marketing and infrastructure costs will free up spending to bolster other businesses, like mobile.

However, the deal means Yahoo will lose some of its most talented engineers to Microsoft, with layoffs resulting in as many as 400 additional employee losses. Moreover, the sale undermines years of investment around search solutions. Bartz nevertheless maintains that Yahoo's core remains intact: "We haven't eviscerated the company," she said.

Per terms of the 10-year agreement, Microsoft will now power Yahoo search efforts, and Yahoo will take over as the exclusive worldwide relationship sales force for both firms' premium search advertisers. Microsoft and Yahoo promise the partnership will offer users more efficient and relevant search results, while delivering better results for advertisers and publishers; Microsoft will compensate Yahoo through a revenue sharing agreement on traffic generated on Yahoo's network of both owned-and-operated and affiliate sites, and will pay traffic acquisition costs to Yahoo at an initial rate of 88 percent of search revenue generated on Yahoo's O&O sites during the first five years of the agreement.

For more on Yahoo's future:
- read this New York Times article [2]

Related articles:
Yahoo [3] gets personal about the mobile web
Yahoo [4] expands mobile search efforts