03 August 2009 | Author: L. Sutherland Head of Media Content

Yahoo! shifts focus from search

Following last week's revelation that Yahoo! has finally succumbed to Microsoft after the longest will-they-won't-they partnership deal in the business, the company that made its name in the search sphere is looking to expand its horizons.

Since selling its search business to Microsoft for an initial 88 per cent share of search revenue in a 10-year deal, Yahoo! has been battling some criticism from shareholders wondering if CEO Carol Bartz could have fought for more favourable terms. However, Ms Bartz revealed to the New York Times that she'd sold the search business because it was no longer able to compete with the spend of main rivals Google and Microsoft in search.

Instead of trying to compete in a sector where the lack of money would always leave Yahoo! trailing behind, Ms Bartz decided to turn to other sectors and use the money from the deal with Microsoft to finance them. Instead the company is to focus on its display ads, content and mobile service.

She told the newspaper: "My first reaction when I got here was that I wouldn't even do a search deal until I looked at our expense structure and our actual options and looked at what our prime job was, which is to grow audience."

However, the deal will see the internet company losing a number of its talented engineers to Microsoft and suffer a large number of layoffs. Ms Bartz claims that the core of the company will remain intact despite this and it seems just another step in the streamlining efforts she has propagated since taking control of the company.

While the figures in the deal have been criticised by some, even Microsoft's Steve Ballmer has spoken out in support of Yahoo! and his pleasant surprise at the terms of the partnership. Ms Bartz fought to clinch the deal she thought best suited to the company - including ensuring that Yahoo! would retain the rights to sell its own display ads to big spending advertisers and, despite the fears of investors, maintains that Yahoo! bowing out of the search race is the best way for it to maintain a money making model in the future.

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