Yahoo also introduced a search application for the iPhone. It lets people search by voice command and is smarter about displaying pertinent information, Katz said. For instance, if a user searches for "Shrek," Yahoo recognizes that as a movie search and first displays some facts about the movie, such as show times and reviews. Users can shake the phone to clear those results, too. That application is available in 22 countries.

Despite Yahoo's search agreement with Microsoft, Yahoo will continue to work on its own search applications like Sketch-a-Search. "What we want to do going forward is focus on the user interface and experience. A product like Sketch-a-Search is an example of what that means in practice," said Katz.

Yahoo faces tough competition from Google and now also from Bing to form search deals with mobile operators. Those deals typically involve the operator preloading a search bar from their preferred partner on a smartphone's home screen.

While Yahoo recently lost a search deal with T-Mobile to Google, it has also won new deals. "The initial arrival of Android created a lot of churn in the market but over time, as the AT&T Backflip example illustrates, we think we will continue to be able to distribute search effectively," Katz said.

AT&T recently decided to use Yahoo search on the Android Backflip. While AT&T has a search agreement with Yahoo, it was not required to use Yahoo on the Backflip, Katz said.