Here's what insiders are saying about Marissa Mayer's new search deal

Marissa MayerNoah Berger/ReutersYahoo! CEO Marissa Mayer

Earlier today, Yahoo renewed its search deal with Microsoft.

The deal brought some huge changes to Yahoo.

Basically: Yahoo now only has to put Bing ads on 51% of its search traffic.

It can do whatever it wants with the other 49%. It could serve its own ads or it could even outsource the 49% to Google.

We talked to a few industry sources about the deal — some closer to Yahoo than others — and here are some of their most interesting thoughts:

  • “If Mayer is prudent, Yahoo will do a deal with Google,” says one source. This person says it could increase Yahoo’s profits by $US50 million to $US200 million per year. This source says Yahoo would be able to get rid of as many as 1,000 Yahoo employees if it went this route.
  • One source says he’s heard what Mayer really wants to do is build a new search engine from scratch and funnel 49% of its search traffic through that for the next five years. This source believes that’s a horrible idea. “This will bring massive cost increases and no revenue increases for a while.” This source estimates that it would cost Yahoo $US500 million per year to build out the workforce and hardware it would need to run a search engine.
  • We think the search deal is a huge win for Mayer because it allows Yahoo to experiment with better search ads providers and may allow it to cut costs on its sales force. A former Yahoo exec says the deal has another benefit: Yahoo can capture more data from its users, and use it to strengthen the rest of its ads business. “When Yahoo outsourced all of search to Microsoft back in 2008 or whenever it was, one of the things they lost access to was all the data that goes along with it. So they couldn’t tell who was clicking what ads which was a huge loss in terms of ad targeting and personalisation. It’s really valuable for companies like Google et al to be able to understand the performance of how certain keywords perform when users search for something. That data can power a bunch of different other products but when they completely outsourced that to Microsoft, they lost access to all of that data. I think a big win for them in all this is that now they will have a big amount of really rich intent data from people searching which should help ad performance and personalisation.”
  • Another former Yahoo had harsher words. “This is a non-announcement — essentially, it’s an announcement that they agree to continue to operate stupidly.” This source says that by putting Bing ads on some of Yahoo’s search traffic, but not all of it, Mayer is taking a small player in the market and splitting it into two smaller, less effectual players. “It’s just plain dumb. Marketplace should be unified. Sales strategy should be unified.” This source thinks the smartest thing Mayer could have done was just shipping all of search off to Microsoft for “a far more aggressive guarantee.”

NOW WATCH: The 3 people Yahoo CEO Marissa Mayer leans on for advice

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