Talks between Yahoo! and Microsoft have lasted for years, and today we finally get to see the two companies enter into a special partnership.
Microsoft will power Yahoo! search while Yahoo! will become the exclusive worldwide relationship sales force for both companies’ premium search advertisers. With Microsoft managing search, Yahoo! will focus on the other parts of its business such as its portal and other web products.
The combination of both companies still isn't as big as Google, which dominates more than 70 percent of all search, but now Yahoo! and Microsoft feel that together they have a fighting chance in the market.
"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. "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."
Microsoft will gain access to Yahoo!'s search technologies and code and will be free to integrate it into Bing if it so wishes. In return, Microsoft will pay traffic acquisition costs to Yahoo! at an initial rate of 88 percent of search revenue generated on Yahoo!’s sites during the first 5 years of the agreement.
The deal between the Yahoo! and Microsoft only cover search and advertising, as the companies' web properties and products, email, instant messaging, and display advertising will remain separate.
“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! CEO Carol Bartz. “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.”
What do you think of this deal? Will the joint forces of these two giants be able to take on the even larger giant from Mountain View?