Microsoft and Yahoo Join Forces against Google
Posted by Jesse Ward on Monday, August 3, 2009 · 
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Microsoft and Yahoo struck a long-anticipated search deal last Wednesday under which Microsoft’s Bing search engine will power Yahoo’s search, and Yahoo will sell premium search advertising services for both companies.
The 10-year deal, which applies only to search, provides Microsoft will have an exclusive license to Yahoo’s core search technologies, as well as the ability to integrate them into Bing. Of note, Yahoo will maintain its own brand on its owned-and-operated search pages; Bing will be listed on those pages as having “powered” Yahoo’s search results. Further, both companies also will continue to be managed separately, maintaining distinct display ad sales teams.
The partnership is an attempt to provide the two companies with leverage against search giant Google, which far and away leads the market in Internet searches, and, as a result, search-driven advertising revenues; Google accounted for 65% of Internet searches in recent months.
As part of the deal, Yahoo also will receive a consistent new revenue stream. For the first five years, Yahoo will enjoy 88% of search revenue generated on its own sites. Yahoo expects the agreement will generate about $500 million in operating income and a savings of about $200 million in capital expenditures. Further, as you may remember, just two months ago Microsoft revamped its search engine and re-launched it as Bing. Bing has received positive reviews in the marketplace and has been taking market share from Yahoo’s search engine.
So it’s clear that Yahoo will benefit from this exposure, but what about Microsoft? Well Yahoo has a larger network of advertisers, a network which Microsoft now will have access to.
“Through this agreement with Yahoo!, we will create more innovation in search, better value for advertisers and real consumer choice in a market currently dominated by a single company,” said Microsoft Chief Executive Officer Steve Ballmer.
The transaction is subject to regulatory review. The companies hope it will close in early 2010.
Read more in the press release.
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