Microsoft and Yahoo! have finally struck an online search and advertising deal that will, as the two companies put it, "improve the Web search experience for users and advertisers, and deliver sustained innovation to the industry." The companies announced a ten-year deal that lets Microsoft power Yahoo!'s searches, and in exchange Yahoo! becomes Microsoft's exclusive partner for worldwide premium search advertisement revenue.
While the deal isn't as far reaching as it could have been, it still signals a big win for Microsoft. The company now has control over a much more credible search engine, and it can potentially become a bigger threat to Google -- the reigning king of Internet search dollars.
In exchange, Yahoo! gets to partner with Microsoft in hopes of generating more search-related revenue. Microsoft has agreed to a revenue sharing deal, so assuming Microsoft can push up traffic to Yahoo!-owned sites, the company should begin generating additional income.
Microsoft won't, however, rely on Yahoo!'s already established search engine technology. Instead, Yahoo! searches will be powered by Microsoft's new Bing search technology, and Yahoo!'s own search technology will be used in "other areas of its business such as enhancing display advertising technology."
Microsoft is saying the deal will give advertisers and customers more choice. Company CEO Steve Ballmer commented "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."
Microsoft and Yahoo!'s site touting their new deal.
The road getting to this deal was a rocky one. The journey began when Yahoo! rejected an unsolicited buy-out offer from Microsoft. The two companies then began a series of on-again-off-again negotiations, Yahoo! successfully dodged a hostile takeover attempt, both sides engaged in public bickering, and ultimately both sides ended up back at the negotiation table again.
Microsoft and Yahoo! also created a special Web site designed to show users and potential advertisers why their team up is a good idea.
The companies are waiting for a regulatory review before moving forward, and hope to be able to close the deal in early 2010.