The companies said the revenues expected from the contract will be approximately $100 million a year following the full product operation in 2017. The development will be a major setback to Yahoo because the deal with AT&T is nearly 15-year old.
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“We have agreed to have Synacor manage our next-generation att.net portal, AT&T-branded applications, and search”, the carrier said in a statement. Instead, AT&T will work with a little-known company called Synacor for its Web-service needs moving forward, cutting Yahoo out of the profits it generated through its search tools and content.
Yahoo! will continue to host email for AT&T customers, but will lose about $100 million in annual revenue from the terminated agreement.
Yahoo, which is now for sale, told the paper only that AT&T was still a “valued partner”. Riley & Co. estimated to the WSJ that the deal had brought that amount to Yahoo every year. AT&T was shifting towards Synacor.
The Wall Street Journal reports that Synacor will split the search and advertising revenue with AT&T. What’s worth noting is that the partnership ended soon after news surfaced that Verizon Communications was being considered as the number one bidder for Yahoo’s core Web properties and maybe more.
Synacor said it is planning to launch initial services for AT&T in the second half of this year, and is aiming to deploy a “next-gen product” in 2017.
About 60% of Synacor’s revenue comes from search and advertising, with the rest coming way of recurring and fee-based models. The company saw a 130% jump in after hours trading and now is trading at $3.20/share, up from $1.41 at the close of the NASDAQ Wednesday.
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Yahoo averted a proxy battle for control of the company with a compromise last week that adds four new board members, including a hedge fund chief who has been critical of management.
