Under the three-year agreement, Google will provide Yahoo with search advertisements on both desktop and mobile platforms. Yahoo, meanwhile, can select which search queries to send to Google and isn’t obligated to send any minimum number of search queries.
Google will pay Yahoo a percentage of the gross revenues from ads displayed on Yahoo, with the percentage varying depending on where the ads are displayed. Yahoo will pay Google fees for requests for image search results or web algorithmic search results. The deal expires Dec. 31, 2018.
The agreement, which will be reviewed by the Justice Department, comes after Yahoo in April amended the terms of its search partnership with Microsoft Corp. MSFT 0.31 % to give it more control over how search results are presented on both desktop computers and mobile devices.
Yahoo Chief Executive Marissa Mayer hinted that more changes are coming to the company. “As we move into 2016, we will work to narrow our strategy, focusing on fewer products.” Ms. Mayer said in Yahoo’s earnings release.
For the third quarter ended in September, the company’s revenue rose to $ 1.226 billion from $ 1.148 billion, falling below the average analyst estimate of $ 1.256 billion on Thomson Reuters. The company’s traffic-acquisition costs rose to $ 223 million from $ 54 million as Yahoo has begun paying its partners more money for users in recent quarters.
Yahoo posted a profit of $ 76 million, or 8 cents a share, compared with a year-earlier profit of $ 6.77 billion, or $ 6.70 a share, which was boosted by the sale of Alibaba Group Holding Ltd. BABA -1.18 % shares in the Chinese e-commerce company’s initial public offering.
On an adjusted basis, per-share earnings were 15 cents in the latest quarter, below analyst estimates of 17 cents a share.
Notably, revenue growth from “Mavens”—a financial metric the company introduced earlier this year to track mobile, video, native and social ads—rose 43% to $ 422 million; however, that is slower than the 60% growth reported in the second quarter. Mavens revenue made up about 34% of the company’s total revenue. Ms. Mayer has steered investors to this stable of assets to offset the declines from elsewhere in the company.
For the fourth quarter, Yahoo projected revenue between $ 1.16 billion and $ 1.2 billion, below the average analyst estimate on Thomson Reuters of $ 1.33 billion and the year-ago total of $ 1.25 billion.
Ms. Mayer is grappling with a falling stock price and an exodus of managers as she struggles to show signs of growth more than three years into her attempt to turn around Yahoo. Two of her top deputies—marketing chief Kathy Savitt and former acquisitions head Jacqueline Reses —left the company in the recent weeks, raising concerns about morale inside the company.
Ms. Reses was put in charge of overseeing the spinoff of Yahoo’s stake in Alibaba Holdings Group Ltd. Yahoo is seeking to reassure investors that the spinoff will be completed by year-end. Last month, Yahoo disclosed the Internal Revenue Service denied its request for a favorable ruling of the plan. Yahoo said it would move forward with the proposed spinoff anyway, running the risk that the IRS could challenge the spinoff in a future audit and potentially putting shareholders on the hook for billions of dollars in taxes.
At the same time, rising costs are weighing on the company’s bottom line as Ms. Mayer spends cash on expensive partnerships.
Write to Douglas MacMillan at [email protected]