The deal, which is a bit like the French surrender during WW2, was announced as Yahoo reported revenue and profit that fell short of what the cocaine nose jobs of Wall Street predicted.
The deal with Google builds on an existing search partnership with Microsoft under which Yahoo gets a percentage of revenue from ads displayed on its sites.
The companies have agreed to delay implementation of the deal in the United States to allow the antitrust division of the Department of Justice to review it.
Yahoo has been struggling to boost revenue from ad sales in the face of stiff competition from Google and Facebook.
It is a sign of how bad things are getting at Yahoo, when the Google deal is cast as one of the few bright spots included in the company’s third quarter results.
Yahoo said it expected fourth quarter revenues of $1.16 billion–$1.20 billion, well below the average analyst estimate of $1.33 billion.
Mayer, in her fourth year as chief executive, said the forecast was “not indicative of the performance we want”.
“We are also experiencing continued revenue headwinds in our core advertising business, especially in the legacy portions,” Mayer said. Maybe the word should be headaches.
Yahoo said the proposed spinoff of its 15 percent stake in Chinese e-commerce giant Alibaba Group Holding – a key matter for shareholders – will go through in January.
Yahoo earlier this year sought a private letter ruling from the Internal Revenue Service to confirm whether the transaction, worth about $27 billion currently, would result in a tax obligation. The tax agency denied the request, but Yahoo said it would go ahead with the spinoff by the end of the year anyway.
Many analysts attribute little value to Yahoo’s core business without its Asian assets, which also include a 35 percent stake in Yahoo Japan.
Other good news came results came from Yahoo’s emerging businesses, which Mayer calls Mavens – mobile, video, native and social advertising.
Revenues in that area rose 43 percent to $422 million in the quarter. Native advertising refers to ads that blend into the type and style of the content being viewed.
Revenues after deducting fees paid to partner websites fell to $1.0 billion from $1.09 billion, and the company forecast a drop to $920 million-$960 million in the current quarter.
Traffic acquisition costs, the amount Yahoo spends to attract users to its websites, jumped to $223 million in the quarter from $54 million a year earlier. Whatever that means.