News

Microsoft-Yahoo Search Deal Gets Regulatory Approvals

• By Kurt Mackie
• February 18, 2010

Microsoft and Yahoo got approvals from U.S. and European regulators to proceed with their search-advertising business deal.

The companies announced on Thursday that they will now begin implementing the terms of the agreement. Microsoft plans to integrate its Bing Internet search technologies into Yahoo's Web sites. Yahoo, for its part, will become the "exclusive" sales agent for both Microsoft's and Yahoo's search-advertising efforts.

At one point, Microsoft had floated a proposal to buy all of Yahoo, but that deal collapsed over the price.

Under the current arrangement, Microsoft will allocate $100 million to $200 million for turnaround costs in the first year to help with the technical integration details. The deal will bolster Microsoft's Internet search market share, which greatly lags market-leader Google. Monetization of search comes through scaling up market share, which is the main aim of the deal, Microsoft's CEO Steve Ballmer has explained.

Google currently has a commanding search lead, with about 86 percent of searches worldwide using its search engine, according to a Net Applications' Marketshare estimate. The Microsoft-Yahoo deal will add Yahoo's 6 percent global search share to Microsoft's current search share.

Marketshare estimates Microsoft's Bing use at just 3 percent use, and it's currently measured for the U.S. market only.

Microsoft's Online Services Division, of which Bing is part, has been a consistent loss leader for Microsoft. Still, Bing has gained market share every month, according to a recent talk by Bill Koefoed, Microsoft's general manager of investor relations. Microsoft built Bing after hiring away several key Yahoo executives and engineering talent, including Dr. Qi Lu, who now heads Microsoft's Online Service Group.

According to the joint Microsoft-Yahoo announcement, the two companies expect to complete an "algorithmic search" transition in the U.S. market by the end of this year. Microsoft and Yahoo plan to move U.S. advertisers and publishers onto the new search-ad platform by the holiday season at earliest.

Worldwide, customers and partners are expected to transition to the new search-ad platform by "early 2012," according to the announcement.