Yahoo! (YHOO) pleased investors Thursday by extending two major partnership deals.
The Internet bellwether tacked on another year of supplying paid-search results to
, and it built on an existing agreement to provide Internet access in conjunction with telco
The announcements give Yahoo! some breathing room in the ever-increasing competition surrounding pay-per-click search advertising. They also strengthen a relationship that has been one of Yahoo!'s biggest drivers of the fees revenue that helps diversify revenue driven mostly by marketing services.
Shares rose 43 cents Thursday to $37.38.
Under the terms of the new agreement with Microsoft, Yahoo!'s Overture Services subsidiary will continue to provide sponsored search results to MSN sites in the U.S., Canada, Europe and Asia through June 2006. The companies' previous agreement had been set to expire in June 2005.
Microsoft has been building up its own search technology to compete with that of Yahoo! and
, and some outsiders had expected Microsoft would take the opportunity of the June 2005 expiration to launch its own paid search service -- in which advertisers pay to be prominently listed among search-engine results.
In a sign of how Microsoft is progressing on the search front, the colossus of Redmond last week
launched a preliminary version of its new
MSN Search service. That MSN Search beta is an algorithmic search service, meaning that results are generated automatically rather than by advertisers' willingness to pay for prominent placement. Microsoft hopes to launch the official version of that algorithmic search engine early next year.
Thursday's announcement regarding paid search "comes as somewhat of a positive surprise for Yahoo! shareholders given MSN's long-term goals in search," wrote CIBC's Michael Gallant in a note Thursday morning. "We previously expected Yahoo! and MSN to part ways in mid-2005 and had, therefore, not included MSN in our estimates for
the second half of 2005 and beyond."
Gallant estimated the near-term financial impact of the agreement to amount to 1% to 2% of Yahoo!'s overall net revenue, but he pointed out that the market's attention may be diverted by word of
Google's cautious outlook for the fourth quarter.
Yahoo! and SBC, meanwhile, are not only extending their 2001 agreement to offer co-branded connections to the Internet. They also announced plans to "extend the SBC-Yahoo! customer experience" to home TV and audio systems, Cingular wireless phones, Wi-Fi Internet connections and home networking equipment.
"This alliance advances the SBC strategy to evolve the 'digital home' into the 'digital lifestyle,'" SBC CEO Edward Whitacre Jr. said in a statement. "What you see on your SBC Yahoo! Internet home page is coming to a TV set or wireless phone near you."
Specific ventures that Yahoo! and SBC talked about launching Thursday include extending SBC Yahoo!'s look and feel to a new home entertainment service to be launched by SBC, one that will be available to SBC Yahoo! DSL subscribers and to customers who will get
fiber-optic data connections via SBC's new Project Lightspeed network. Among the features of that service, say the companies, will be video on demand, Internet radio, and remote access to digital video recorders.
In recent months, the bigger telcos have talked up their plans to build out fiber networks that would challenge cable TV operators in their delivery of video to the home. But cable operators and other skeptics note that telcos have made such promises before, only to abandon such plans as economically unfeasible.