Yahoo wants to return to its roots as a search engine

Trying search once more.
Trying search once more.
Image: AP Photo/Julie Jacobson
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Yahoo wants to be a search giant once more.

Chief executive Marissa Mayer is intent on investing in search, a move that would ultimately give the company more “autonomy and control over this critical piece of our business,” she told investors on a call yesterday (July 21).

Citing rising costs, Yahoo reported a loss of $22 million in the second quarter, down from a $270-million profit a year ago, even as it increased revenue by 15% to $1.24 billion.

Currently the third-biggest search engine, Yahoo has long struggled to compete in this arena, instead choosing to rely on its search partners, Google (2000 to 2004) and Microsoft’s Bing (2009 to present). But in April, Mayer successfully renegotiated its 10-year deal with Microsoft to give Yahoo more flexibility over its search business.

Under the new terms, Bing is serving the majority (51%) of Yahoo’s search results, but Yahoo is free to generate the remaining results using its own technology or with another partner—both options the company is currently exploring. (Yahoo is running a limited test serving Google search results, but Mayer declined to comment on the agreement.)

A former Google executive, Mayer is keenly focused on mobile search. ”I actually think that desktop search is a reasonably well-understood problem,” she said. “It has good solutions available in market, and it comes with a lot of user expectations. There is not a lot of room left for innovation in our estimation. We think that all of the interesting innovation is going happen on the mobile search side.”

However, Gartner analyst Mike McGuire tells Quartz he thinks Yahoo’s renewed focus on search is “a bit quixotic,” questioning its ability to execute and capture market share.

Recently, Yahoo has been aggressively growing its search business. In the second quarter, the number of paid clicks increased 13% and search revenue rose 22% year-on-year.

To increase its share of search traffic, Yahoo is relying on key partnerships. In a blow to Google, it won a five-year deal in November to be the default search engine on Mozilla’s Firefox browser, helping boost its share of search traffic to 12.7% from 10.2%. It struck a similar partnership with Oracle in June to set Yahoo as the default search engine for users of Java software, which is installed on 89% of desktop computers.

And there’s one other partnership that could make all the difference for Yahoo. Google’s deal to be the default search engine on Apple’s Safari browser—used by 19% of smartphones and 60% of tablets worldwide—is reportedly set to expire in 2015. Yahoo has made no secret that it wants to fulfill that role.

“Safari users are among the most engaged and lucrative users in the world,” Mayer said earlier this year, “and it’s something that we would really like to be able to provide.” But competition—including Google, Microsoft, and even Apple, which could undertake the endeavor to build a search engine from scratch—is steep.

“Could Yahoo win the Apple deal?” McGuire asks. “I would not take that bet.”