Microsoft, Yahoo in search deal to fight Google

Software giant Microsoft and Internet major Yahoo! on Wednesday signed a 10-year search deal that will see the two firms jointly challenging the dominance of Google in the search business.

"In simple terms, Microsoft will now power Yahoo! search while Yahoo! will become the exclusive worldwide relationship sales force for both companies' premium search advertisers," the companies said in a joint statement.

Yahoo! will use Microsoft's Bing search-engine technology on its own sites under the pact.

Under the agreement, Yahoo! would focus on its core business of providing consumers with great experiences with the world's favorourite online destinations and Web products. The companies expect the closing to occur in early 2010.

Microsoft would acquire an exclusive 10-year license to Yahoo!'s core search technologies, and Microsoft would have the ability to integrate Yahoo! search technologies into its existing Web search platforms.

Microsoft will compensate Yahoo! By way of a revenue sharing agreement on the traffic generated on the Yahoo web site.

Last year Microsoft had a made an abortive bid to acquire Yahoo. However, discussions between the two companies that began then led to the two companies finally joining forces. The deal let Microsoft and Yahoo share resources, reach, experience and combine scale.

Google currently has more than twice the global search market share (at 65 per cent), while Yahoo and Microsoft together have about 30 per cent share.

"This agreement gives us the scale and resources to create the future of search," Microsoft CEO Steve Ballmer said in a statement.

"Success in search requires both innovation and scale. With our new Bing search platform, we've created breakthrough innovation and features. This agreement with Yahoo will provide the scale we need to deliver even more rapid advances in relevancy and usefulness."

Yahoo CEO Carol Bartz, meanwhile, said that the move will help Yahoo focus on other areas, also adding that the move has the full support of the company's board (lest anyone wonder what Carl Icahn thinks about the more limited deal).

"This is a significant opportunity for us," Bartz said. "Microsoft is an industry innovator in search and it is a great opportunity for us to focus our investments in other areas critical to our future."

The deal must clear all regulatory hurdles before it is finalised. "Microsoft and Yahoo expect the agreement to be closely reviewed by the industry and government regulators, and welcome questions," the statement said. "The companies are hopeful that closing can occur in early 2010."