Memo: Yahoo president tells the troops about scuttled Google deal

Earlier today we announced that Google has terminated the advertising services agreement Yahoo! and Google announced in June. Yahoo! continues to believe in the benefits of the agreement and we are disappointed that Google has elected to withdraw from the agreement rather than defend it in court. Google notified us of its refusal to move forward with implementation of the agreement following an indication from the Department of Justice that it would seek to block it, despite Yahoo!’s proposed revisions to address the DOJ’s concerns. While this turn of events is regrettable, it’s important for all Yahoos to recognize that our agreement with Google was just one of many efforts that we have underway to accelerate our strategy. While the implementation of the services agreement with Google would have enabled Yahoo! to accelerate its investments in its top business priorities through an infusion of additional operating cash flow, this deal was incremental to Yahoo!’s product roadmap and does not change Yahoo!’s commitment to innovation and growth in search. The fundamental building blocks of ...

... a stronger Yahoo! in both sponsored and algorithmic search were put in place independent of the agreement.

Specifically, there is no doubt that we are improving monetization and driving query growth. Yahoo! continually optimizes its algorithmic and sponsored search, and we have, in 2008 alone, developed and launched hundreds of improvements all designed to enhance search quality and deliver a more relevant search experience to the company’s users, including index expansions and updates, ranking models, and performance tuning. All of these features are designed to improve search quality and deliver a more relevant search experience to our users. Not surprisingly, we are seeing results, with the company benefitting from strong RPS gains, as discussed in our Q3 earnings call. Further, we are adding search and contextual ad functionalities on a regular basis. Most recently, we enhanced our geo-targeting capabilities to help advertisers better target their ads with powerful country, city and zip-code targeting and improved reporting.

Because the marketplace is dynamic and changing rapidly, Yahoo! has been undertaking quite a lot on its own to improve the user, advertiser and publisher experience. We are intensifying our efforts to create a more open, efficient and effective marketplace with as many tools as possible for advertisers and publishers to manage how they interact with users. We plan to provide cutting-edge advances in products, platforms and services that the industry needs and expects. We will lead the way in helping advertisers navigate the continued convergence between the contextual and search ad markets. Finally, we will continue to provide the marketplace with one of the largest and most engaged populations of consumers on the web.

At our very core, Yahoo! stands for innovation, for entrepreneurism at its finest, for technology excellence and for pioneering the online experience, and I know that we can achieve our goals and that we have the right assets and team in place to succeed on this journey.

Thank you for your steadfast commitment to these values and this mission. Please let us know if you have questions.

Sue