Microsoft, Yahoo Officially Team Up on Search, Advertising

Posted 07/30/2009 at 12:50pm | by Pulkit Chandna

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The saga that began with Microsoft’s failed attempt to acquire Yahoo has finally culminated in a unique partnership, which puts Microsoft in charge of Yahoo’s search engine business and hands over the reigns of Microsoft’s online ads business to Yahoo. However, the 10-year deal will not have any impact on the two companies’ respective display ads businesses. The partnership is expected to triple Bing’s U.S. market share to 28%.

Microsoft CEO Steve Ballmer is currently on cloud nine. "This is what I have basically been saying for the past 18 months: The world will be better served for consumers, advertisers and publishers, and there will be more competition for Google, if we can somehow figure out how to get Microsoft and Yahoo together in search,” he said in an interview.

It won’t be easy to figure out an effective way to merge Bing and Yahoo! Search into a single search solution. The two companies expect the deal to be fully implemented in the next 24 months. Though Yahoo hasn’t been promised any money upfront, it expects its annual operating profit to swell by $500 million due to this arrangement, as it won’t have to spend much on improving its search technology.

“Nobody gets it,” Ballmer remarked in a meeting with Wall Street analysts. He reckons people are confused as the deal does not involve any acquisition or merger. “Nothing got bought and nothing got sold. But there is a magical way to create revenue synergy and cost synergy by putting these two things together.”

Image Credit: SearchEngineWatch