"This is a company struggling for relevance," said Rob Enderle, principal analyst at Enderle Group. "Social networking, rather than search, was closer to Yahoo's initial strength, and they lost their way by going after Google. This takes them back to their roots, and typically that is a good thing. This does give Yahoo some much needed visibility."
Yahoo and Twitter said the deal calls for enabling Yahoo's search engine to access real-time Twitter tweets in its search results. The agreement will also let Twitter feeds be accessed on various Yahoo properties, including its home page and its Yahoo Mail and Yahoo Sports pages. And Twitter users will be able to update their status from Yahoo sites, the companies said.
Last October, Twitter signed similar deals to integrate tweets into Google and Microsoft Bing search results.
Analysts note that the Yahoo-Twitter deal goes a step or two further by enabling users to access their Twitter feeds and to make status changes from Yahoo sites.
"The Yahoo deal is more extensive than the deals Google and [Microsoft] made with Twitter, and I think it demonstrates a new assertiveness on the part of Yahoo," said Augie Ray, an analyst at Forrester Research Inc. "The new Twitter-Yahoo deal has the potential to position Yahoo in the intersection of the search, content and social worlds. Whether this allows Yahoo to grab more buzz and build some momentum will depend upon the speed and effectiveness in rolling out the new Twitter features."
Ezra Gottheil, an analyst at Technology Business Research, said the move should help struggling Yahoo to slowly move in a more positive direction.
"I think [Yahoo] has to get comfortable with being a slow-growth company," said Gottheil. "It needs to communicate to the world and to the market that it's a long-term growth concern. It's not likely to show explosive growth going forward.
"Companies can't grow like high-tech start-ups forever," Gottheil added. "Most healthy companies mature and go into a phase of slower growth and reasonable profitability. It's harder to do that in the tech world, where every year some new company passes you in some metric, but if you take care of your customers, you can go on for a very long time."
Analysts also noted that this week's deal is the latest sign that Twitter has reached a new level of relevance.
For a long time the microblogging site was thought of as a silly service that enabled people to yammer on about their favorite sandwich or the great parking spot they snagged in front of their favorite restaurant. But last year, the company turned a corner when Twitterers began using the site to get information out about important events, like turmoil in Iran and rescue efforts after the devastating earthquake in Haiti.
"For Twitter, this [week's deal] continues to cement its place in the social media world," Ray said. "Twitter's traffic continues to grow, but there are some nagging reports that some portion of new users post a couple of times and then drift away. These search engine deals help to raise Twitter's profile and drive traffic to Twitter. And Yahoo's approach will help to make Twitter a vital part of Yahoo users' communication and sharing tools."