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Microsoft, Yahoo Forge Search Partnership Deal

July 29, 2009
In an effort to increase competition against search giant Google (News - Alert), Microsoft Corp. and Yahoo Inc. today announced that the companies joined forces in an Internet search and advertising partnership.
 
Under the 10-year agreement, Microsoft’s (News - Alert) new Bing search engine will power searches on Yahoo.com. In return, Yahoo will serve as the worldwide sales force for both companies’ search advertisers. The deal is expected to close sometime in early 2010.
 
Yahoo CEO Carol Bartz (News - Alert) said the partnership would offer a significant alternative to competitive search, giving users a better experience and advertisers efficiencies to work with a single platform and sales force.
 
“What the deal is really about for everyone is scale,” Bartz said in a conference call minutes ago. “By combing the scale and technology of both companies, we can offer real value for users and advertisers.”
 
For users, the partnership will offer better search functionality with more relevant ads, Bartz said.

The agreement calls for Microsoft to license Yahoo’s search technologies. In return, Yahoo will receive 88 percent of search-generated ad revenue during the first five years of the deal. Bartz said the revenue sharing agreement will boost the company’s operating income by about $500 million annually.
 
The deal, however, does not cover each company’s Web properties and products, e-mail, instant-messaging, display advertising, or any other aspect of the companies’ businesses, Yahoo and Microsoft said. The companies will continue to compete in those areas.
 
“This is great news for all of our customers,” Microsoft CEO Steve Ballmer (News - Alert) said during a conference call today. “The agreement will really enable us to create better value for advertisers and real consumer choice. This is a win-win agreement for Microsoft and Yahoo. Both companies will benefit from scale and economics. Consumers will get a better product and advertisers will get better ROI. It will help the industry as a whole to prosper.”
 
The move to combine Yahoo, the No. 2 search engine, with Bing, the No. 3 search engine is part of a strategic move to steal market share from the dominant Google giant. In a jab to Google, the companies said in a joint statement that the partnership will give advertisers an alternative to search adding that “advertisers no longer have to rely on one company that dominates more than 70 percent of all search.”
 
Early in its launch, Bing surpassed Yahoo as the No. 2 search engine. Yet since the roll out, Bing has been well received, Ballmer said.
 
Meanwhile, Google is keeping watch of its competitors. The company recently announced some new features available to enhance its search functionality to maintain its edge over its rivals. As TMCnet reported, the new services are designed to help Web surfers who can’t find what they need through initial searches and assist others with more complex research.
 

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Amy Tierney is a Web editor for TMCnet, covering unified communications, telepresence, IP communications industry trends and mobile technologies. To read more of Amy's articles, please visit her columnist page.

Edited by Michael Dinan
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