Microsoft and Yahoo Agree on Partnership

By now you have probably heard the news Microsoft and Yahoo! agreed on an Internet search partnership. This is a 10-year deal to take on Google, which holds a 65% market share in online search. By combining search operations, advertisers (clients) will benefit from an increase in visitor traffic and quality.

If this deal is approved by American and European regulators, it is expected to close in by mid 2010. U.S. users may start to see the change as early as three months later and users around the world will see the full effect within two years. and will maintain their own branding but search results on will say “powered by Bing.” Yahoo!, in turn, will be responsible for attracting premium advertisers. Microsoft will pay Yahoo! 88% of the revenue it gains from searches on Yahoo!’s sites. Microsoft will also have the rights to integrate Yahoo!’s search technology into its own existing Web search platforms. Yahoo! said the agreement will modestly decrease its overall revenue but increase its operating income by about $500 million annually. 

Here are excerpts from the Microsoft/Yahoo! press conference:

  • The deal isn’t expected to occur prior to Q2 2010.  The companies first will give antitrust regulators time to review the proposed partnership’s effects on the Internet ad market 
  • Yahoo! CEO Carol Bartz anticipates about 2 years (2012) to implement the integration of different technologies
  • Publishers will find combination to have better reach and competitive rates than apart
  • Carol Bartz stated “we have full flexibility on what to do within our own sites”

 On a side but related note, over the past few weeks Bing (Microsoft’s new search engine), has shown a material uplift for many client campaigns, in both traffic and conversions.

What will this mean for Google?

The actual effect the Microsoft-Yahoo partnership could have on the search market is anyone’s guess. Certainly, Google is in the companies’ sights: Microsoft CEO Steve Ballmer describes the move as a way to provide “real consumer choice in a market currently dominated by a single company.”

But could it have any real impact? Many are expressing their doubts. Some analysts, however, point out that if Microsoft and Yahoo have any chance of chipping away at Google’s search market stronghold, this would be it.