NHN, which dominates the search market in South Korea and has been relying on Yahoo to power search ads on its Naver search engine for six years, says it won’t be renewing the deal — marking the second time in two months that a major Asian partner has cut ties with Yahoo (NSDQ: YHOO). Barclays Capital analyst Douglas Anmuth says NHN is Yahoo’s biggest search affiliate and estimates the defection could cost Yahoo as much as $600 million in annual gross revenue, although the impact on Yahoo’s net revenue — which excludes traffic acquisition costs — will be a much smaller $30 million. (Update: In an SEC filing this afternoon, Yahoo said the NHN deal represented less than 1 percent of its gross profit during the first half of the year).
NHN is the second major Asian internet company to break up with Yahoo, which is in the process of outsourcing its own search technology to Microsoft’s Bing. In July, Yahoo Japan said it would use Google (NSDQ: GOOG) instead of Yahoo to power search on its site. In passing over the company, Yahoo Japan CEO Masahiro Inoue said Yahoo’s search technology was not