Microsoft, Yahoo link up in Internet search deal
— -- Microsoft and Yahoo have finally struck a deal to take on giant rival Google.
The 10-year partnership, announced Tuesday, will combine technologies, revenue sharing and ad search sales staff for the two tech and ad giants.
The two competitors paired up to better challenge Google, which has 88% of the search market business. Ad search is the biggest chunk of the $23.4 billion Internet ad business and accounted for 45%, or $10.5 billion, last year, according to the Internet Advertising Bureau. That's a 20% increase at a time when ad when advertising was down 2.6%
At the core of the deal is Bing, Microsoft's new search engine, unveiled in May. The positive response to Bing helped pave the way for the deal, says Microsoft CEO Steve Ballmer.
"If Bing was not good, I bet we would not have a partnership," he says.
Yahoo CEO Carol Bartz says the combined market reach of Yahoo and Microsoft will eventually serve consumers well with improved search results and more relevant ads. "It all sounds like a win for consumers and advertisers to me," Ballmer said.
Bartz said she isn't concerned about a 11% drop in Yahoo shares this morning. "I'm not a CEO who believes in short-term things," she says. "I believe this will play out well in the long run. It's hard to give a report card on (this year) based on half a day of trading."
Search advertising, those pesky little text ads that pop up when you search for a term, business or topic are considered the holy grail of advertising. If a consumer clicks on them they present timely, relevant ads. Google dominates that market.
"The hope (for Microsoft and Yahoo) is that better technology will mean more relevant results and more relevant results will attract more users," says David Hallerman, senior analyst with eMarketer. "More users mean more potential to click on ads and that means more money."
Terms of the deal include:
• Microsoft has a 10-year exclusive license to Yahoo's search technologies and will be able to integrate Microsoft's search technology into Microsoft's existing Web search platforms.