Yahoo 2015 Annual Report Download - page 159

Revenue is attributed to individual countries according to the online property that generated the
revenue. No single foreign country accounted for more than 10 percent of the Company’s revenue in
2013, 2014, and 2015, respectively.
Note 19 Search Agreement With Microsoft Corporation
On December 4, 2009, the Company entered into the Search Agreement with Microsoft. On
February 18, 2010, the Company received regulatory clearance from both the U.S. Department of
Justice and the European Commission and on February 23, 2010 the Company commenced
implementation of the Search Agreement on a market-by-market basis.
On April 15, 2015, the Company and Microsoft entered into the Eleventh Amendment to the Search
Agreement (the “Eleventh Amendment”) pursuant to which the terms of the Search Agreement were
amended. Previously under the Search Agreement, Microsoft was the exclusive algorithmic and paid
search services provider to Yahoo on personal computers for Yahoo Properties and for search
services provided by Yahoo to Affiliate sites. Microsoft was the non-exclusive provider on mobile
devices. Pursuant to the Eleventh Amendment, Microsoft will provide such services on a non-
exclusive basis for Yahoo Properties and Affiliate sites on all devices. Commencing on May 1, 2015,
Yahoo agrees to request paid search results from Microsoft for 51 percent of its search queries
originating from personal computers accessing Yahoo Properties and its Affiliate sites (the “Volume
Commitment”) and will display only Microsoft’s paid search results on such search result pages.
Previously under the Search Agreement, the Company was entitled to receive a percentage of the
revenue (the “Revenue Share Rate”) generated from Microsoft’s services on Yahoo Properties and on
Affiliate sites after deduction of the Affiliate sites’ share of revenue and certain Microsoft costs. The
Revenue Share Rate was 88 percent for the first five years of the Search Agreement and then
increased to 90 percent on February 23, 2015. Pursuant to the Eleventh Amendment, the Revenue
Share Rate increased to 93 percent, but Microsoft now receives its 7 percent revenue share before
deduction of the Affiliate site’s share of revenue. The Affiliate site’s share of revenue is deducted
from the Company’s 93 percent Revenue Share Rate.
Additionally, pursuant to the Eleventh Amendment, the Company has the ability in response to
queries on both personal computers and mobile devices to request algorithmic listings only, paid
listings only or both algorithmic and paid listings from Microsoft. To the extent the Company requests
algorithmic listings only or requests paid listings but elects not to display such paid listings, the
Company pays Microsoft serving costs but not a revenue share. In other cases and with respect to
the Volume Commitment, the Revenue Share Rate applies.
Previously under the Search Agreement, Yahoo had sales exclusivity for both the Company’s and
Microsoft’s premium advertisers. Pursuant to the Eleventh Amendment to the Search Agreement, this
sales exclusivity terminated on July 1, 2015. The Company and Microsoft are transitioning premium
advertisers for Microsoft’s paid search services to Microsoft on a market-by-market basis. As of
December 31, 2015, such transition was continuing for markets in North America and Europe.
The term of the Search Agreement is 10 years from its commencement date, February 23, 2010,
subject to earlier termination as provided in the Search Agreement. As of October 1, 2015, either the
Company or Microsoft may terminate the Search Agreement by delivering a written notice of
termination to the other party. The Search Agreement will remain in effect for four months from the
date of the termination notice to provide for a transition period; however, the Company’s Volume
Commitment will not apply in the third and fourth months of this transition period.
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