NEW YORK Yahoo Inc (YHOO.O) President Susan Decker defended the company's Web search advertising deal with larger rival Google Inc (GOOG.O), saying some investors and industry participants had yet to understand its advantages.
In an interview with Reuters on Friday, she would not discuss reports of an executive exodus and an impending reorganization of the company's products division that sent Yahoo shares down more than 3 percent on Friday.
Decker focused comments on concerns that the Google deal eventually would cut into Yahoo's competitive position against Google, which has steadily grown an already-dominant share in the search market.
Yahoo still aims to build up its position in search and views it as inseparable from bolstering growth in other online ad markets, such as graphical display. Tests the two companies had conducted also showed the deal would not prevent Yahoo's Panama search advertising system from gaining ground.
The deal would help Yahoo make money off of less-used search terms, for one, she said.
"It is really a back-fill in places where we're not doing much business," Decker said. "It's our choice every day whether and how we might serve ads from Yahoo or Google, or a third party if we opened it up further."
Shares in Yahoo are down 16 percent since the company ended buyout talks with Microsoft Corp (MSFT.O) last week and instead forged a non-exclusive ad deal with Google for up to 10 years.
Investor concerns over Yahoo's future have also mounted amid daily reports of executives leaving, including Jeff Weiner, executive vice president of its network division, and Qi Lu, the top engineer for Panama.
Some of those departures may stem from efforts to reorganize Yahoo's products group -- including e-mail and search -- and integrate their operations on a global level.
Yahoo's chief executive and co-founder, Jerry Yang, has been making the rounds in Washington to explain the Google deal as some lawmakers express concern about its effect on consumer privacy and advertising rates.
Decker said the deal has been positively received by advertisers and publishing partners, even if investors have not warmed to it as a long-term means of boosting growth.
"This is a unique deal. The market and the participants are still getting their arms around what this means," Decker said.
"It's not a wholesale or even partial getting out of a business, and that's where I think there's been a lot of noise from various parties that are trying to characterize it as something different," she said.
Yahoo has courted support for the deal from leading advertising executives, including Publicis (PUBP.PA) Chief Executive Maurice Levy, who describe it as creating a more open marketplace for them to reach audiences.
"This makes far more sense to me than jettisoning their search business, which would have been a mistake in the long run," Levy said in a statement.
Yahoo has estimated the Google deal could add up to $450 million in operating cash flow in its first year.
Investors have also questioned whether it measures up to Microsoft's most recent proposal to take a stake in Yahoo and buy its search business for $9 billion, saying that deal would add $1 billion to Yahoo's operating profit. Last month, Microsoft abandoned a full $47.5 billion takeover offer.
One investor, Mark Nelson of Mithras Capital, has urged Microsoft to bring its proposal directly to shareholders ahead of Yahoo's annual meeting on August 1, where the company faces a proxy battle with billionaire Carl Icahn.
Yahoo shares fell 74 cents to $21.99 on Friday.
(Editing by Braden Reddall)