BREAKING: Microsoft, Yahoo announce new partnership on advertising and search

By on

image

After speculation of the future of Microsoft and Yahoo talks, both parties have announced that they have forged a new agreement that will see Microsoft’s new Bing search engine powering Yahoo, while Microsoft will hand off search advertising to Yahoo.

The new deal, which is a huge coup for both parties, will allow Yahoo and Microsoft to compete with Google – as it no longer has to go through the two parties to advertise on either Bing or Yahoo Search.

Image from: Choice Value Innovation (Microsoft/Yahoo)

“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,” Steve Ballmer, CEO of Microsoft, said in a press release.

“Success in search requires both innovation and scale. With our new Bing search platform, we’ve created breakthrough innovation and features. This agreement with Yahoo! will provide the scale we need to deliver even more rapid advances in relevancy and usefulness. Microsoft and Yahoo! know there’s so much more that search could be.”

“This agreement gives us the scale and resources to create the future of search,” he continues.

“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,” Carol Bartz, the CEO of Yahoo, said in the same press release.

“Users will continue to experience search as a vital part of their Yahoo! experiences and will enjoy increased innovation thanks to the scale and resources this deal provides. Advertisers will also benefit from scale and enjoy greater ease of use and efficiencies working with a single platform and sales team for premium advertisers. Finally, this deal will help us increase our investments in priority areas in winning audience properties, display advertising capabilities, and mobile experiences.”

The agreement is set in stone for ten years – which will also see Microsoft licensing Yahoo’s core search technology to integrate into Bing, while its AdCenter platform will be used by both companies to serve self-serving advertising. Yahoo will get some of the advertising profit on a revenue sharing agreement through its websites, and will get paid at an initial rate of 88 percent of search revenues from traffic acquisition costs from Microsoft.

However, it does not cover its other web properties in e-mail, instant messaging or other competing aspects of their businesses. It also needs regulatory approval from the Department of Justice, but both parties are hoping that this can close in early 2010.

In Australia, this would mean that Bing will be powering Yahoo!7 Search, which is possibly a good thing as Seven owns a share of Consolidated Media Holdings, which owns PBL Media, who in turn owns NineMSN, who runs Bing in Australia.

Despite spending huge money in upgrading the search engine from Windows Live Search, it still has a miniscule market share, but it did gain in market share from the previous Windows Live Search – and while it is small, it is considered huge as it is, obviously, competing with powerhouse Google.