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Yahoo President Susan Decker defended the company’s Web search advertising partnership with larger rival Google (NASDAQ: GOOG), saying some investors and industry participants had yet to understand its advantages.
In an interview with Reuters on Friday, Decker addressed concerns that the deal would eventually cut into Yahoo’s competitive position against Google, which has steadily grown its already dominant share in the search market.
“It is really a backfill in places where we’re not doing much business,” Decker said. “It’s our choice every day whether and how we might serve ads from Yahoo or Google, or a third party if we opened it up further.”
Yahoo still aims to build up its position in search, and tests the two companies had conducted showed the deal would not prevent Yahoo’s Panama advertising system from gaining ground, she said.
Shares in Yahoo (NASDAQ: YHOO) have slipped 16 percent since the company said last week it had ended buyout talks with Microsoft and instead forged a nonexclusive search ad deal with Google for up to 10 years.
Yahoo has estimated the deal could add up to $450 million in operating cash flow in its first year.
Investors have questioned whether it measures up to Microsoft’s most recent proposal to take a stake in Yahoo and buy its search business for $9 billion, saying that deal would add $1 billion to Yahoo’s operating profit. Last month, Microsoft abandoned a full $47.5 billion takeover offer.
One investor, Mark Nelson of Mithras Capital, has urged Microsoft to bring its proposal directly to shareholders ahead of Yahoo’s annual meeting on Aug. 1.
“This is a unique deal,” Decker said. “The market and the participants are still getting their arms around what this means.”
“It’s not a wholesale or even partial getting out of a business, and that’s where I think there’s been a lot of noise from various parties that are trying to characterize it as something different,” she said.