Yahoo’s Mayer Plans Search Revamp to Narrow Google’s Ad Lead

SAN FRANCISCO (Bloomberg News) —

Yahoo Inc. Chief Executive Officer Marissa Mayer plans to unveil tools for internet search, including making it easier to find information on mobile devices, stepping up efforts to nab share from Google.

“We’ve got some really cool things in the pipeline, which we’ll be announcing and rolling out over the coming months,” Laurie Mann, senior vice president of search, said in his first interview since being promoted to the post in February.

Some of the upgrades are being developed in tandem with Yahoo’s search partner, Microsoft, while other improvements will be unique to Yahoo, he said.

Mayer, CEO since July, is seeking to revive growth at Yahoo through increased competition with Google in the $19.8 billion market for search-related advertising. She’s also striving to make the most of the partnership with Microsoft after earlier unsuccessful attempts to unravel the pact, which hasn’t lived up to the company’s expectations, people with knowledge of the matter said.

Before joining Yahoo, Mayer helped build Google into the world’s most popular search engine. The company commanded 73 percent of U.S. search-ad revenue in 2012, her last year at Google, according to EMarketer.

“As someone who works with Marissa literally every day, there is nothing more important to her than getting search right,” said Mann, a 10-year veteran of Yahoo. “She knows search better than pretty much anyone in the industry.”

Mann leads a group of hundreds of workers at Yahoo’s Sunnyvale, Calif. headquarters, as well as remote offices, focused on creating new ways for users to access search results and search-based advertisements served up by Microsoft’s Bing search engine. The group is increasingly investing in tools for performing searches on smartphones and tablet computers, he said.

“We’d be kind of foolish to not be thinking a lot about mobile,” Mann said. “Yahoo is dramatically increasing the people in the company working on mobile, and search is no different.”

Mann declined to comment on Mayer’s attempt to end the partnership with Redmond, Wash.-based Microsoft, or provide more details about search products in development.

“We have an alliance that we’re actively working on together,” said Adam Sohn, a spokesman for Microsoft. “There’s real momentum in our ad platform and the product quality share.”

Gaining ground against Google has been a challenge so far. Yahoo’s share of search has fallen since 2009, when then-CEO Carol Bartz decided Yahoo would rely on Microsoft for search technology. Yahoo’s share of U.S. searches shrank to 12 percent in March from 14 percent a year earlier, according to researcher ComScore Inc. Google claimed 67 percent of all searches in March, followed by Microsoft’s 17 percent.

The tie-up with Microsoft has resulted in lower-than- expected revenue per search, and Microsoft has attempted to make up for the shortfalls with revenue guarantees that last through March 2014. The partners continue to work together to take market share away from Google, Mann said.

“As with anything, more would be better, and we are continuing to work with them to keep things rolling,” he said.

Mann said he frequently travels to Microsoft’s headquarters to meet with Qi Lu, his former colleague, who joined Microsoft in 2008 to run the company’s online services.

Mayer’s inability to negotiate an end to the agreement means Yahoo will probably be bound to Microsoft at least until 2015, when either side may choose to terminate the deal.

In a May 8 interview at the Wired Business Conference, Mayer said she compares Yahoo’s opportunity in search with that of a winemaker who buys grapes from another grower.

“You can be a winemaker because you grow your own grapes, or you can be a winemaker because you do them in a certain style,” she said. “Most of the innovation on search will happen in terms of the user interface.”

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