Yahoo-Microsoft Search Deal Cleared

DOJ, European Commission approve pact, but will it even sniff Google?

Last Updated: February 18, 2010 @ 12:09 PM

Yahoo and Microsoft announced on Thursday that the intricate search deal the companies announced last summer has been approved.

The Department of Justice and European Commission have both approved the pact, clearing the way for the merger.

The agreement unites Yahoo’s search technology and Microsoft’s Bing search engine, effectively creating the world’s number two search engine behind Google.

But the deal is a complicated one, and it remains to be seen if it will even rattle Google, which has had a stranglehold on worldwide search. (Google has 64 percent share of worldwide searches, according to Network World. Combined, Yahoo and Microsoft account for roughly half that.)
As outlined last year, the deal does not include an upfront payment to Yahoo; instead, the companies will share in search revenues. (Microsoft will pay traffic acquisition costs to Yahoo at an initial rate of 88 percent of search revenue generated on Yahoo-owned sites during the first five years of the agreement.)

Microsoft will now “power” Yahoo’s search, while Yahoo will become the exclusive worldwide relationship sales force for both companies’ premium search advertisers. Yahoo expects to save $200 million a year as a result of the merger.

“This deal is really about scale,” Yahoo CEO Carol Bartz said in July.

“We think it gives consumers real choice,” Steve Ballmer, Microsoft’s chief executive, said then. Ballmer said the agreement will give Bing the scale to make it more attractive to users and advertisers, which will lead to more relevant ads and search results.

Thursday’s announcement brings puts a bow on what was more than a year of on-and-off, often tense negotiations between the two companies — including a failed, $44.6 billion hostile takeover of Yahoo by Microsoft.

That failed takeover led the eventual ouster of Yahoo CEO Jerry Yang, the company’s co-founder.

More to read:

Microsoft/Yahoo Deal Targets Giant Google
Why Yahoo, Microsoft Execs Won’t Say ‘Google’