Yahoo plans to tap listings and reviews from Yelp as part of an effort to improve local search results.

According to numerous sources inside the company, CEO Marissa Mayer confirmed the deal to employees at its weekly all-hands meeting on Friday. She told the group that Yahoo had closed a deep content licensing deal with the San Francisco recommendations site, similar to ones it has previously struck with Apple and Microsoft.

Yahoo product exec Anand Chandrasekaran, who was a key player in the Yelp partnership, took to the stage to show how integration would look, a partnership that he said would be announced soon.

The tie-up was also reported earlier today by the Wall Street Journal.

Mayer has long been interested in Yelp, including trying to convince Google to buy it when she was an exec there. The acquisition never happened for a number of reasons, although it got very close. But Mayer has clearly never lost her interest in the company.

Since then, the relationship between Google and Yelp has worsened, with the smaller company alleging — and they are right to do so — that the search giant squelches Yelp results in favor of its own properties.

In her new job, then, Mayer instantly became an obvious Yelp ally. And such a hookup is good for her, too.

In a post a few weeks ago, I noted that Mayer was going to focus on local search, including — short of an acquisition — a likely partnership deal with Yelp:

Most intriguing for Yahoo — and most pricey and unlikely — would be picking up the publicly traded Yelp. It’s tried once before, pre-IPO, and Mayer was involved in Google’s attempt to grab it then.

The recommendation company’s stock has soared over the last year, giving it about a $5 billion valuation, despite a basic lack of profits. Yelp is expected to report just over $67 million in the fourth quarter next week, for example, on a net loss of $1.8 million.

Still, it is showing a torrid annual growth rate and it certainly could quickly move to profitability. Most attractive: Local advertising represents close to 80 percent of its revenue, much of which is tied to mobile.

Mobile and revenue growth? While sources at Yelp said it is “highly unlikely” that it would ever sell, you get the picture it could paint for Yahoo, knitting together a lot of the varied and seemingly disorganized moves by Mayer over the last 18 months.

But it might be too late to grab — a recent J.P. Morgan research report said Yelp shares might reach $89 from its current $72.44.

In that case, with any of these companies, Yahoo is more likely to do deep content and advertising partnership deals, which would bring them into its universe more closely.

More important are the implications around the wider Yahoo search business, an area that Mayer is now doubling down on in hopes of lucrative growth that she needs badly. Display and other ad revenue has been declining at Yahoo, even as it grows for everyone it competes with. The company’s latest quarterly results underscored the depth of the problem, with more declines in its core business.

I wrote recently about two under-the-radar initiatives Mayer was pushing to get the company back into algorithmic search, as well as search advertising.

As I wrote:

The internal code names for the efforts — which are not actually being done together, though they are in tandem — are borrowed from sports. In this case, basketball and baseball: Projects Fast Break and Curveball, respectively.

Sources said the plan is being done as part of a contemplation of how Yahoo can accelerate the end of — or actually end — its long-term search and advertising partnership with Microsoft. Currently, Yahoo only has control over the search experience, but Mayer clearly wants more purview over the business.

Fast Break and Curveball involve a number of top Yahoo execs, including Laurie Mann, SVP of search products; Adam Cahan, SVP of mobile and emerging products; and Jay Rossiter, SVP of platforms. (If SVP of ad tech Scott Burke shows, it’s a party — not a fun one exactly, but it is what it is in Sunnyvale these days.)

Sources said Mayer has put a priority on the projects — a three- to four-month time frame — which could eventually result in a full search engine, possibly more oriented to mobile than the desktop, where Yahoo once played big.

The deal with Yelp is clearly a big part of that, the first steps into what could be a fascinating new battle with Google and Microsoft — Yahoo’s current search partner — to reimagine search.

Despite being ahead at the Internet’s start, Yahoo lost that critical fight many moons ago — ironic, because it gave Google its first big break. One could argue that the loss of the search market was one of the reasons for its consistent slide.

The question is: Can Mayer grab it back?



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