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Yahoo! Partners with Microsoft's Bing

29 Jul, 2009 Response This Week


SUNNYVALE, Calif. and REDMOND, Wash. – Yahoo! Inc. closed a deal with Microsoft that will merge its search engine to Bing, the newly launched Microsoft search site. The deal has been a long time coming, with the two major search rivals to market leader Google bouncing back and forth through negotiations on various deals for many months.

The deal will consolidate 30 percent of the search marketplace and make Microsoft a more credible competitor to Google, which leads the market with 65 percent of search share.

“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,” said Microsoft CEO Steve Ballmer.

The deal will increase Yahoo!’s search inventory by allowing it to sell search ads on Bing.com as well as its own site, making it a bigger player in search sales. “This agreement comes with boatloads of value for Yahoo!, our users and the industry,” says Yahoo! CEO Carol Bartz.

Both companies expect government scrutiny of the deal, as antitrust regulators from the U.S. Department of Justice are expected to take a close look at the deal.

As part of the deal, Yahoo! is expected to move into the media, marketing and sales side of the business, ceding its role in search technology. Yahoo! will exclusively represent Bing.com’s inventory in order to minimize confusion for advertisers. Once Microsoft and Yahoo! untangle and clarify literally thousands of different advertiser relationships affected by this partnership, it is expected that Microsoft's AdCenter will be the new business’ sales technology platform.

With Yahoo! taking on sales duties for the new entity, Microsoft would become the tech and infrastructure-based partner in the deal – a position more in line with the company’s strong points.

For weeks, the most recent negotiations were on and off due to disagreements over revenue — Yahoo! wanted an upfront payment (estimated to be several hundred million), in addition to revenue guarantees that would amount to billions over the course of the deal, while Microsoft expected to compensate Yahoo! based on a revenue share from the sale of search ads, according to AdAge.com.


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