A 15-year partnership between AT&T and Yahoo has been terminated by AT&T. The partnership had been longstanding in the Internet industry and had seen so many changes since its inception. AT&T was shifting towards Synacor.
AT&T was awarding the new contract to a new company called Synacor, a company relatively unknown in the telecom circles. The new contract includes hosting AT&T Web portals and mobile portals. This signifies a huge shift in business from Yahoo by the company.
In a statement, the company noted that they had decided to shift the business from Yahoo to Synacor. Synacor would be responsible for the att.net portal; the AT&T branded applications and search for the company. Yahoo however still continues to host the email service for the company though according to a source this is now nothing but a small part of what Yahoo originally had.
A Yahoo spokeswoman commenting on the new development said AT&T was still an important partner to the company but denied to comment on anything further.
The news definitely comes at the wrong time for Yahoo as they are engaged in talks with prospective buyers at this time who want to buy the ailing business. One of the bidders of Yahoo is AT&T’s rival in the telecommunications business Verizon Communications Inc.
One analyst at B Riley and Co., Sameet Sinha said be believed the AT&T deal generated about $100 million for the troubled internet company. The deal enabled AT&T customers to use the Yahoo search engine on the default AT&T website. Yahoo also included other media services on the website. As for the revenue, the two companies split the search and ad revenue between themselves.
Mr. Sinha believes the partnership brought in hundreds of millions of revenue for Yahoo over the course of the partnership, most of which went to the bottom line. This he says, is due to the fact that Yahoo did not need to put in many resources in the project, and therefore they got strong profit margins for the venture.
The ad revenue from AT&T deal or any of its broadband partners is not revealed separately, but there is no doubt the deal was a big contributor to the company’s shrinking search and ad display revenue. Search revenue for the company declined by 21 percent in the first quarter to $347.7 million, and display revenue without commission was down 1 percent to $380 million.
Himesh Bhise, Chief Executive at Synacor, said the deal would bring in $100 million in 12 months time once all the services and features of the deal had been deployed. Synacor is going to split the ad and display revenue with AT&T just as the previous deal between Yahoo and AT&T was like. Visitors to website www.att.net have been constant in the past three years though the number fell last year by 8.7 percent to 8.4 million in March.
News of the deal is a big boost for Synacor, which had been under pressure from investors in the past for underperforming. Mr. Bhise said the deal had put the company on a track of being three times its size in three years time.
News of the three-year deal sent Synacor shares skyrocketing to $3.30, double the price they were on at $1.41.
