Microsoft & Yahoo! Announcement….

Microsoft and Yahoo! have finally made some progress on the partnership they’ve been working on for years. It’s a 10 year deal and was announced on Wednesday.

Talk is this deal pits Yahoo! and Microsoft against Google in a real way that they hope will take some of that coveted Google market share.

Microsoft will reach more consumers with Bing, their new engine launched in June.  Taking over the search on Yahoo’s site gives Microsoft a better chance to get to surfers that had been using Google by force of habit.

“Microsoft and Yahoo know there’s so much more that search could be,” said Microsoft Chief Executive Steve Ballmer. “This agreement gives us the scale and resources to create the future of search.”

In exchange for giving Microsoft the power behind their search, Yahoo will get to keep 88 per cent of the revenue from all search ad sales on its site for the first five years of the deal, they will also have the right to sell ads on some Microsoft sites.

Yahoo! could use the extra revenue after just coming off a tough quarter, with its revenue falling 15 per cent in the April-June period.

A downside to the deal for Yahoo! is that they will have limited access to the data on users’ searches – which provides insight that can be used to pick out ads more likely to capture a person’s interest. There is high value in that data which is why Microsoft wants to process more search requests.

Microsoft has remained a distant third in market share, with its losses piling up. Their “Internet Services division” lost $2.3 billion in the fiscal year ending in June (nearly double what they lost last year).  They are counting on Bing to turn things around.  Bing has had mostly positive reviews and has increased its traffic slightly lately (thanks in part to a big advertising push – that had a big cost attached to it).

Together Microsoft and Yahoo! have a 28 percent share of the Internet search market in the United States (compared to Google’s 65 per cent)

Globally Google dominates even more -  with a global share of 67 per cent compared to a combined 11 per cent for Microsoft and Yahoo.

This partnership has to face antitrust scrutiny and be approved before it’s all finalized.

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