Microsoft and Yahoo have signed a ten-year search and advertising deal for Microsoft’s Bing search engine to power Yahoo’s search. Yahoo will provide search ad sales teams for both companies’ joint bid to challenge search engine giant Google.
The companies inked the much-discussed deal on 29th July, in which Microsoft will provide Yahoo’s search engine, and Yahoo will be the exclusive worldwide relationship sales force for both companies’ search advertisers.
Microsoft will pay traffic acquisition costs (TACs) to Yahoo at an initial rate of 88 percent of search revenue generated on sites owned and operated by Yahoo during the first five years of the agreement.
The deal, coming 18 months after Microsoft failed to buy Yahoo for $44.6 billion, has a duration of ten years, during which the Microhoo combination will be working feverishly to chip away at search engine giant Google’s 65 percent market share, which recently translated into a 19 percent growth in profits at Google. Competition between the two has become intense of late
Microsoft and Yahoo hold 8.4 percent and 19.6 percent of the market, respectively; together, although Microsoft Bing’s share is growing. They believe closing the gap will make them a worthy adversary of Google. Yahoo and Microsoft said in a statement:
“Providing a viable alternative to advertisers, this deal will combine Yahoo and Microsoft search marketplaces so that advertisers no longer have to rely on one company that dominates more than 70 percent of all search. With the addition of Yahoo’s search volume, Microsoft will achieve the size and scale required to unleash competition and innovation in the market, for consumers as well as advertisers.”
Microsoft CEO Steve Ballmer said the agreement will give Bing the scale it needs to more effectively compete, “attracting more users and advertisers, which in turn will lead to more relevant ads and search results.”
Yahoo CEO Carol Bartz said in a statement that the deal will enable Yahoo to improve its display advertising and mobile areas, while providing advertisers greater scale and efficiencies working with a single platform. Yahoo showed a new beta home page last week, including more social media.
Last week, Yahoo investor Carl Icahn publicly approved the then-hypothetical deal.
The terms of the deal are as follows:
Yahoo and Microsoft will continue competing in Webmail, instant messaging, display advertising and other aspects of the companies’ businesses.
The transaction is subject to regulatory review, but the companies hope to close the deal in early 2010.
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