Yahoo's Q3 earning fall short of expectations
Yahoo's Q3 2015 earnings missed Wall Street expectations, posting $1.23bn in sales and adjusted earnings per share (EPS) of 15 cents against analysts’ expected $1.26bn and EPS of 17 cents. The stock lost a further 0.8% in after-hours trading, having closed down 2.0% in regular trading at $32.83 per share. CFO, Kevin Goldman, revealed that Yahoo lost $42m on 'Community' and two other original series as it could not effectively monetise the programming. After announcing the Q3 results, CEO, Marissa Mayer promised that Yahoo will focus on fewer products with better quality in 2016 in order to improve growth. Yahoo also announced a new deal with Google for search results and ads. Following on from Yahoo and Google's 2008 antitrust lawsuit, Yahoo said they and Google have taken steps to avoid antitrust issues and will work with regulators to review details.   

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Yahoo announced it will soon be able to choose Google to complete its users’ Internet searches and to deliver ads around the search results.

Currently, Yahoo can direct its searches to Microsoft Bing, or use its own search engine and ads. It can also send its searches to other third-party search engines. The company will use its own discretion to select which searches go to Google, and can send as many or as few as it wants, according to an SEC filing.

“Google’s offerings complement the search services provided by Microsoft, which remains a strong partner, as well as Yahoo’s own search technologies and ad products,” Yahoo said in its quarterly earnings release today. However, Yahoo did not mention making any guarantees to Microsoft that the number of searches it sends to the Bing search engine will remain the same.

Under the deal, Google will pay Yahoo a percentage of the revenue it earns from the ads it places around search results at Yahoo and Yahoo affiliate sites. The percentage will depend on whether the ads are seen on the desktop or on mobile devices, and on the geographic location of the target of the ads. Yahoo said it will pay Google for requests for image search results or web algorithmic search results.

In 2008, Yahoo had a similar advertising agreement with Google, but was forced to abandon the arrangement following a Department of Justice antitrust lawsuit.

The fact that three search giants are now working together in a platform to sell search ad space raises red flags, as it appears to shrink the universe of players selling search ad space, which could drive ad prices up.

However, Yahoo said it and Google have taken steps to avoid antitrust issues. The company further stated that it’s willing to work with regulators to review the details of the Google arrangement.

Yahoo also pointed to its announcement that it will be unifying all of its programmatic advertising systems under its BrightRoll brand. This means marketers will be able to go to BrightRoll’s trading desk for programmatic buying of video, display, and native advertising.

BrightRoll’s demand-side platform (DSP) connects ad buyers and ad sellers of video and display ad space through integration with 100 other trading desks, websites and mobile apps. The trading desk uses Yahoo data to facilitate ad buying in real time, Yahoo said.