The Microhoo / Yahsoft Partnership Goes Ahead

By Craig Buckler
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Microsoft Yahoo partnershipThe Microsoft-Yahoo partnership has been approved following eight months of legal shenanigans. The deal announced last year has been unconditionally cleared by the US Department of Justice and the European Commission. Australia, Brazil and Canada have already agreed the terms, although both companies are still working with regulators in Japan, Korea, and Taiwan.

Outspoken Microsoft CEO Steve Ballmer stated:

I believe that together, Microsoft and Yahoo will promote more choice, better value and greater innovation to our customers, as well as to advertisers and publishers.

Under the terms of the 10-year deal:

  • Microsoft will be able to select any of Yahoo’s search technologies and a number of key employees.
  • Yahoo will adopt Microsoft’s Bing search engine. Engineers will begin integration shortly and hope to have the work completed by the end of 2010 in the US. Other territories will follow soon after.
  • Although Microsoft will provide the back-end technology, Yahoo will control how results are presented on their own site.
  • Yahoo will concentrate on selling premium search advertising and will receive 88% of the revenue raised.
  • The future for Yahoo search-related projects such as BOSS (Build your Own Search Service) and YQL (Yahoo Query Language) are uncertain, however, Microsoft is unlikely to abandon popular systems which increase market share.

The partnership is an all-out assault on Google. Neither Microsoft or Yahoo has achieved much success separately, even though the Redmond giant has invested $5 billion over the past 4 years. Google made no official comment and did not oppose the partnership.

The deal was warmly received by NASDAQ investors. Microsoft and Yahoo shares rose 1.2% and 0.7% respectively. But Google also increased by 1.1%, so there’s little business intelligence to be ascertained from those figures.

In the US, Google has a little over 65% market share. Yahoo has 17% and Bing 11%, so the partnership should give a combined US share of just under 30%. Google is far more dominant elsewhere and handles almost 90% of UK searches.

In some ways, the deal offers less choice for web users. Yahoo’s search engine is very good and it’s a shame to see it go. However, shared technology and increased usage should help Microsoft improve Bing’s search engine results. Will that persuade users to migrate from Google? Only time will tell…

What do you think? Will the partnership succeed and does it offer viable competition to Google?

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