[This post is being updated throughout the day.]
Is the Bing-Yahoo partnership like a good marriage that sometimes hits rough spots? Or is it more like a marriage in which at least one of the partners is seeking a divorce?
The partnership between Microsoft’s Bing and Yahoo was one of the topics of conversation during the Bing Ads Next Summit, a day-long event on the Microsoft campus in which the Bing Ads team is talking with online and search marketing execs and press about its accomplishments and plans for the next year.
Microsoft’s search and search ad business has been most prominently in the news lately after a U.S. judge earlier this month ordered Yahoo to proceed with rolling out its search partnership with Bing after Yahoo had sought to delay implementation. That follows on reports from earlier this year that Yahoo was seeking to get out of the search partnership, which has not made a dent in Google’s dominance in the search market and which has been trying to improve its revenue per search.
David Pann, general manager of Microsoft’s search business, talked about those Yahoo moves today during an interview at the Summit.
“Microsoft is 200 percent committed to the partnership and the alliance,” he said.
Based on the latest earnings results, search advertising revenue was up 47 percent for Microsoft, Pann said, while for Yahoo, “earnings were flat but search was a driving force.”
“We’re seeing record revenue per search,” Pann said. “From our point of view, the alliance is working.”
As to criticism that the Bing-Yahoo partnership isn’t chipping into Google’s search market share, Pann said: “Bing has continuously grown its query share. We would’ve hoped that Yahoo would’ve been doing the same. We had high hopes that Marissa (Mayer, Yahoo’s CEO), with her high knowledge of search, would’ve been able to reverse its downward trend of query search. We believe she will.”
He said Bing’s integration across more of Microsoft’s platforms would mean exposing more people to Bing and Bing Ads, and an increase in query share.
Pann also said Bing Ads is “taking share of wallet away from Google” and that “our share of wallet is growing.”
Both Microsoft and Yahoo will have the chance in 2015 to see whether the partnership has met certain performance measures and “determine what the next phase of the partnership” will be at that point, he said.
Rik van der Kooi, chief operating officer of Microsoft’s Applications and Services division, speaking at the Summit, characterized the relationship between the two companies this way: “There’s always a little strife in all good marriages. You should just put that under that header, as far as I’m concerned. We are both completely committed to the partnership.”
Microsoft and Yahoo had agreed to a 10-year partnership in 2010 in which Microsoft’s Bing powers Yahoo’s searches and Bing’s ad platform serves up search ads for both Yahoo and Bing. Yahoo would sell premium ads for both. (As part of the agreement, Microsoft was making payments to Yahoo, based on the difference between a revenue guarantee agreed upon by both companies, and the amount of revenue actually generated. Earlier this year, the companies agreed to change those payments into fixed-amount payments for each quarter through March 2014. The amount of the quarterly payments is not being disclosed.)
But the partnership hasn’t toppled Google’s dominance. When the partnership began two years ago, Google had 66 percent share of the U.S. search market, while Yahoo had 17 percent and Bing 11 percent. Currently, Google has about 67 percent, while Yahoo and Bing merely traded places — Yahoo now has about 11 percent share, while Bing has 18 percent, according to comScore.
Earlier this year, Yahoo CEO Mayer had apparently sought to end the partnership, according to a Bloomberg report. More recently, Yahoo had sought to delay rolling out the partnership in Taiwan and Hong Kong until after Mayer had a chance to talk with whoever succeeds Steve Ballmer as Microsoft’s new CEO, according to a Reuters report.
At the summit today, though, the Bing Ads team’s focus was on its improvements to its products, its accomplishments over the past year and its focus for 2014.
Over the last 12 months, search-related ads powered by the Bing Ads platform has seen a 25 percent increase in “healthy clicks” – clicks that maintain an advertiser’s return on investment, said Brian Utter, a general manager with Bing Ads.
In addition, he said, Bing Ads has offered more than 900 feature updates and is now focusing on helping advertisers by using industry-specific “vertical lenses.” For instance, Utter said, Bing Ads is offering industry-specific data insights and strategy solutions for the retail, telcos and travel industries.
Bing Ads is also rolling out a pilot project called “Hero ads” — essentially image-rich, action-oriented search ads. The Hero ads are currently only viewable by a small number of users — 44 percent of Windows 8.1 users in the U.S. who type in certain specific brand names, including Radio Shack, Home Depot, Land Rover, and few other companies that are partnering with Microsoft on this project.
A “Hero ad” from Land Rover is at the top of this page. Here’s what one from Home Depot looks like:
Microsoft is not currently charging its partners for the “Hero ads,” since the project is still in the pilot stage — expected to last about six months. They declined to say how much the company would eventually charge advertisers for such ads.