Don't adjust your screen folks, it's finally official. Microsoft and Yahoo! have finally struck a search deal. No, Microsoft will not be acquiring all of Yahoo! No, Yahoo! will not be slicing off search and selling it off to Microsoft.
Under the 10 year agreement, Bing will power Yahoo! search, creating a Google competitor that last month reached a combined 28.4% of the search market share, according to comScore. Microsoft will also be able to integrate Yahoo! search technologies into its web search platform.
Meanwhile, Yahoo! will sell the search advertising for the newly combined entities. AdCenter will be the self-service search ad platform. This will take a long time to implement as they adjust relationships with thousands of advertisers.
Display advertising will not be affected by the deal. Both companies will maintain their programs separately.
Microsoft will pay Yahoo! 88% of search ad revenues generated by Yahoo! sites. Yahoo! expects to see $275 million operating cash flow as a result of the deal.
"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," said Yahoo! Chief Executive Officer Carol Bartz.
Yahoo! will now focus primarily on their media sites, many of which are #1 in their categories. Sites like Yahoo! Finance and Yahoo! Sports are very popular and bring in millions of unique visitors per month.
"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," continued Bartz. "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."
For its part, Microsoft is finally getting what it wants: an increased search market share to take on rival Google. Microsoft CEO Steve Ballmer hopes that combining the resources of the #2 and #3 search engines will help innovation, which he says is needed to steal share from Google.
"With our new Bing search platform, we've created breakthrough innovation and features," said Ballmer. 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."
Antitrust issues will likely rear their ugly head, with Microsoft poised to seek the blessing of the DOJ. Expect Google to lobby against the deal, but keep in mind that Christine Varney, Assistant AG at DOJ Antitrust is on record saying she wants to go after Google for antitrust issues. She has also said that Microsoft antitrust issues are, like, so 1990s.
Alright, SEW readers, time to unleash your initial reaction to this deal. That's what the comments section below is for. What do you think of this deal? Will they be able to take on Google? Do you want to use AdCenter to for search ads on Yahoo!? Let us know!