Yahoo Inc. and Microsoft Corp. on Wednesday reached a 10-year Internet-search deal which the two companies said will create better choice for consumers and advertisers.
"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 two said in a joint statement.
Under the deal, Microsoft's newly-launched Bing search engine will be the exclusive algorithmic search and paid search platform for Yahoo sites.
According to their agreements, Yahoo will be responsible for the worldwide sale of search ads for both companies. Each company will maintain its own separate display advertising business and sales force.
Microsoft also agreed that it will pay Yahoo 88 percent of the search revenue generated on Yahoo owned and operated sites during the first five years of the agreement.
With the addition of Yahoo search volume, the deal will give Microsoft the size and scale it needs to penetrate the Internet search market.
Microsoft started to roll out Bing at the beginning of June in the hope of reviving its Internet search business.
Bing helps Microsoft make some gains in the search market. However, latest figures from market research firm ComScore showed that the software giant had a share of 8.4 percent in the U.S. search market, lagging behind Yahoo's 19.6 percent and Google's 65 percent.
A partnership with Yahoo means Microsoft will secure a nearly 30 percent share of the U.S. search market, giving it more muscle to challenge the dominance of Google.
"Through this agreement with Yahoo, we will create more innovation in search, better value for advertisers and real consumer choice in a market currently dominated by a single company," said Steve Ballmer, Microsoft's chief executive officer (CEO).
On Yahoo's part, the deal can result in huge savings of technology costs.
Yahoo said it estimates that the agreement will add about 500 million U.S. dollars to its annual operating income and can help save 200 million dollars in capital expenditure.
"This agreement comes with boatloads of value for Yahoo, our users, and the industry, and I believe it establishes the foundation for a new era of Internet innovation and development," said Yahoo CEO Carol Bartz.
"This deal will help us increase our investments in priority areas in winning audience properties, display advertising capabilities and mobile experiences," she noted.
The companies said the transaction will be subject to regulatory review and they expect the deal to be closed in early 2010.
(Xinhua News Agency July 30, 2009)
