Yahoo and Microsoft have finally agreed a deal that will see a combination of the number two and number three in web search try and wrestle from Google a bigger share of the highly lucrative search ad market.
The two companies today announced a 10-year internet search partnership that will see Yahoo power its sites with the new Microsoft Bing search-engine technology, and Microsoft integrate aspects of Yahoo’s search software into its own web search platforms.
It has been confirmed that Microsoft will not be paying anything upfront, and has offered only to pay traffic acquisition costs to Yahoo.
In broad detail, Yahoo will sell ads on both sites and receive 88% of the revenue from all search ad sales on its sites for the first five years, something the company said would help boost its annual operating income by $500 million
According to Reuters Yahoo has estimated the deal will yield capital expenditure savings of $200 million and improve annual operating cash flow at the company by about $275 million.
Each company will maintain its own separate display advertising business and sales force, they said.
After the failed takeover attempts by Microsoft, a deal has long been coming and the shape and timing of the agreement is being attributed to the arrival of former AutoCAD boss Carol Bartz as the new CEO at Yahoo.
Market-watchers say the deal falls well short of changing the competitive dynamics of the Google-dominated internet search market, but should at least help maintain the relative positions of the companies.
