By Brandon Bailey, San Jose Mercury News –
SAN JOSE, Calif. — Facebook and Yahoo said Friday they have agreed to an expanded advertising partnership while settling a controversial patent lawsuit initiated by Yahoo’s former CEO, who was ousted in a resume-padding scandal two months ago.
The settlement allows both sides to use some of the technology that was in dispute, but it also provides for no direct cash payments. That prompted some to call the outcome a defeat for Yahoo, which had drawn fierce criticism from some in the tech industry when it launched the lawsuit in March.
But analysts said the advertising partnership could benefit both companies if it lives up to the glowing terms that each side used to describe the arrangement Friday. The deal provides for promoting and distributing some digital media content — and potentially showing more users’ “likes” or recommendations — across both companies’ websites.
“That could be valuable for both sides if it allows them to share data,” said Karsten Weide, an Internet and social media expert at tech research firm IDC. He said the end of the lawsuit amounted to Yahoo telling Facebook, “Oops, sorry we bothered you. It won’t happen again.”
By resolving an unpopular dispute, however, the agreement could turn out to be a feather in the cap for Yahoo’s acting CEO, Ross Levinsohn. He now appears to be the leading candidate to become Yahoo’s chief executive on a permanent basis, after a representative for Hulu CEO Jason Kilar confirmed Friday that Kilar has taken himself out of consideration for the job.
Levinsohn, a former News Corp. executive who most recently oversaw Yahoo’s digital media division, led the settlement talks for Yahoo after former CEO Scott Thompson was forced out in May. Thompson had launched Yahoo’s patent lawsuit against Facebook as part of a broader effort to find new revenue, at a time when Yahoo has been struggling to compete with newer rivals including Facebook and Google.
In the lawsuit, which Yahoo filed just two months before Facebook’s initial public stock offering, Yahoo claimed that Facebook should pay royalties for using social media and online advertising tools that Yahoo had patented years earlier. Facebook denied the claims and fired back with a countersuit contending that Yahoo had infringed some Facebook patents.
The suit turned into a public relations debacle for Yahoo after some prominent software developers and venture capitalists publicly accused Yahoo of acting like a “patent troll,” the industry’s derogatory term for a company that makes money primarily from filing patent suits rather than from selling its own products.
In a joint statement released by the two companies Friday, Facebook Chief Operating Officer Sheryl Sandberg made a point of praising “Yahoo’s new leaders” for their “renewed focus on innovation and providing great products to users.”
Levinsohn, in turn, said in the statement that Yahoo is “excited to develop a deeper partnership with Facebook.” He added, “I’m grateful to Sheryl and her team for working hard together with our team to develop this dynamic agreement.”
The companies did not divulge many specifics of their partnership, although Levinsohn said in the statement that it will provide “unmatched opportunity” for advertisers.
Among other things, the statement said Yahoo and Facebook will “work more closely and collaborate together on multiple tent-pole and anchor events.” That’s a reference to Yahoo’s strategy of using major news or entertainment events, such as sports tournaments or awards shows, to produce a variety of online articles, pictures and advertising aimed at capitalizing on public interest in those happenings.
The statement also said the companies will build on a previous arrangement using Facebook’s Open Graph platform, which allowed Web users to tell their friends on Facebook when they “like” items they found on Yahoo sites. Although the statement did not provide detail, it appears the companies are exploring broader arrangements for showing Facebook friends’ recommendations to users while they are visiting Yahoo’s sites.
Yahoo and Facebook could both benefit if their partnership helps them go further in selling advertising that targets users based on their own preferences or friends’ recommendations, Weide said. He added that Facebook’s smaller advertising staff could benefit from a combined sales effort.
Facebook, the younger of the two companies, has grown rapidly in recent years while Yahoo has seen its revenue and profit decline.
