With 990 issued patents, and approximately 2100 pending patent applications, Yahoo has a sizable patent portfolio. Yahoo owns a suite of patented technologies developed in-house and through patents obtained by acquiring Inktomi and Overture Services (which had previously acquired the pioneering search engines AllTheWeb and AltaVista).
The Inktomi acquisition provided Yahoo with proprietary search engine technology, while the Overture Services acquisition provided Yahoo with paid search and monetization technologies.
The vast majority (70%) of Yahoo’s patents relate to proprietary search engine algorithms. These patented technologies include algorithms focused on page ranking methods, search engine optimization (SEO), website crawling and indexing, query processing, link reputation evaluation, and efficient data mining/retrieval.
Yahoo’s next largest group (17%) of patents relate to algorithms and systems for search monetization. The technologies include targeted advertisement delivery, paid inclusion advertising, and management platforms for advertisers.
The third highest category (7%) of Yahoo’s patents relate to interfaces and browser technologies. These patents focus on user experience and cover methods for displaying information in user-friendly formats, on both traditional displays and mobile/WAP-enabled displays.
4% of Yahoo’s patents relate to data transmission and digital communication. While certainly not a player in the telecommunication and broadband field, Yahoo’s patented technology in this space relates to efficient data transfer that assists in speeding up search engine delivery, as well as delivery of content to mobile devices. Rapid content delivery to mobile platforms has recently become an important and crucial aspect of the search business, and these patents could provide an acquirer with unique proprietary technologies to provide a better mobile search experience.
Finally, Yahoo has a small portfolio (2%) of patents related to online gaming. Yahoo enjoys a healthy share of the adult gaming market due to its wildly popular fantasy sports platforms, but its lack of patents related to online gaming show that Yahoo has focused its research and development efforts on search engine-related technology, and it has not forayed much outside of this area.
Potential Yahoo Acquirers
Google’s interest may lie in Yahoo’s search monetization technologies. Google currently licenses several patented technologies from Yahoo related to pay-per-click and keyword bidding systems. By owning these technologies outright, Google can complement its AdWords and AdSense networks, as well as become a gatekeeper to new entrants in the search monetization business by requiring licenses to these fundamental technologies.
Microsoft’s existing partnership with Yahoo capitalizes on Yahoo’s search monetization and ad-display technologies, but it does not harness Yahoo’s search algorithms (Microsoft’s Bing uses its own proprietary search engine technologies). Microsoft could benefit from Yahoo’s extensive portfolio of search engine technologies to bolster Bing.
Private Equity/New Entrant: Yahoo’s patent portfolio, and specifically, its patents pertaining to search algorithms and monetization, could provide a springboard for a new competitor to quickly capitalize on Yahoo’s current market share and brand recognition, and possibly re-invent Yahoo using underutilized patented technologies to make a stronger push to challenge Google and Microsoft.