After months of speculation, Yahoo announced today that it has renewed its relationship to use Google's results as part of its search listings. In addition, Yahoo made a substantial change to end its historic barrier between human-powered and crawler-based search results.
Since its birth, Yahoo has used its own human editors or "surfers" as it calls them to organize web sites into categories. However, recognizing that humans can't index everything, Yahoo also has for years partnered with a third-party "crawler-based" search engine to provide answers for when there are no matches within its own human-powered listings.
Historically, the third-party search providers have been paid by Yahoo for the queries they handled. Since Yahoo has consistently been one of the most popular search sites on the web, the amount of queries it generates translates into serious money. In 2001, Google was paid $7.1 million by Yahoo for the search queries it handled, according to a Yahoo proxy statement filed in March.
Fighting For Yahoo
Competition for the latest Yahoo contract was intense. In addition to Google, both Inktomi and FAST were also seeking the contract. However, Google has made history by being the first provider to win the Yahoo deal twice in a row.
Yahoo has been a fickle about its partners. Open Text was the company's first partner, then AltaVista won the contract in mid-1996. It was then dumped for Inktomi in mid-1998, in particular because AltaVista was seen by Yahoo as competitor in the portal space while Inktomi ran a "behind-the-scenes" business model of powering but never competing with portals.
When Inktomi lost out to Google in 2000, this seemed both due to Google's growing reputation of having high quality search results and also what was widely assumed to be a better business proposition by Google to Yahoo. In fact, it turned out later that as part of the deal, Yahoo gained a small investment stake in privately-held Google.
Two Strikes But One Great Hit
Going into the latest competition, Google had two strikes against it. First, some at Yahoo believe that Google may be capturing their visitors. Google certainly does handle a search volume more than double that of Yahoo's as measured by "search hours," and Google has nearly equal Yahoo's 30 percent reach of the US search audience, according to figures from Nielsen//NetRatings.
In addition, a deal earlier this year between Yahoo and Overture precluded Google from giving Yahoo both its editorial and paid listings. As a result, Yahoo -- which is looking to maximize revenues wherever possible -- was potentially looking at a situation where it either had to pay Google to keep it as its partner or go with another provider and earn money.
This is something that both Inktomi and FAST could offer, because some of their crawler-based results are sold on a "paid inclusion" basis. Unlike with Overture, those purchasing paid inclusion are not guaranteed to receive a particular ranking. This means Yahoo could have gone with one of these partners without violating the exclusive deal Overture has to provide the company's US-based web site with guaranteed placement listings.
Despite these two drawbacks, Google had one major factor strongly in its favor. The company is widely acknowledged as being a leader for search relevancy. Indeed, Google has become a synonym for web search to some people.
Yahoo initially partnered with Google so that Yahoo's own users would feel they were getting both the quality of Google and the unique view that Yahoo's human-powered results bring to the web. Given this, dropping Google could have backlashed against Yahoo and made it seem as if the company was selling out search relevancy to gain cash, regardless of the fact that both Inktomi and FAST has very good relevancy themselves.
Using Google More Than Ever
In a unique twist, Yahoo didn't simply renew the deal for Google to be its "backup" partner, used only when Yahoo itself doesn't have an answer. Instead, the company has embraced Google's results even more tightly. Unveiled to the general public today is a new Yahoo search results page, where there is no longer a separation between Yahoo's own human-powered listings and Google's crawler-based results. Instead, the two are blended together.
This article is available in its entirety on the web. In addition, a longer, more detailed version is available for members of Search Engine Watch. Use these links to access the complete stories online:
Yahoo Renews With Google, Changes Results
Yahoo Renews With Google, Changes Results
Search Engine Watch Members Version
A longer, more detailed version of this article covers new developments at Yahoo specifically of interest to web masters and search engine marketing specialists, exclusively for members of Search Engine Watch.
Yahoo's Profits and Sales Are Better Than Expected
The New York Times, October 10, 2002
Yahoo Inc. posted better-than-expected sales and profits yesterday as it gained market share in both advertising and job listings from its rivals. It also said it had renewed its contract with Google to provide results for searches of Web pages. Many people expected Yahoo to abandon Google, which has become one of the most popular sites, in part because of the credit it received on Yahoo's pages.
Yahoo Celebrates £18.5m Profit
The Media Guardian, October 10, 2002
Internet giant Yahoo has enjoyed its best quarter since the dotcom crash of 2000, reporting better than expected profits and a 50% increase in revenues. The results are the first fruits of chief executive Terry Semel's new strategy, which has seen jobs slashed and an increase in the number of paid-for services on the site.
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