Yahoo! and Microsoft reached agreement today on a long-awaited Web search partnership that would unite the two companies against market leader Google. Under the no-cash deal, Yahoo! will use Microsoft’s new Bing search engine on its own sites, while Yahoo! will act as the exclusive global sales force for the companies’ premium search advertisers.
Yahoo!, which last year turned down a 47.5-billion-dollar takeover bid from Microsoft, said it stood to gain about 500 million dollars in annual operating income and 200 million in capital expenditure savings through the agreement with the software giant. The Sunnyvale, California, company also estimated the deal would provide it with a 275-million-dollar benefit to annual operating cash flow.
“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,” Yahoo! chief executive Carol Bartz said in a statement.
The partnership, Microsoft said, “will improve the Web search experience for users and advertisers, and deliver sustained innovation to the industry.”
Microsoft chief executive Steve Ballmer said the deal will enable Bing to better compete against Goggle, as well as attract more users and advertisers. 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. This agreement gives us the scale and resources to create the future of search.”
The agreement, which has a 10-year term, will be subject to review by US regulatory authorities, the companies said. It is restricted to Internet search and related advertising revenue, while the pair would retain full autonomy on other properties and products such as email, instant messaging and display advertising.
Calling the link-up a “significant opportunity,” Yahoo! chairman Roy Bostock said the company’s board backed it with its “full and unanimous support.”
“Microsoft is an industry innovator in search, and it is a great opportunity for us to focus our investments in other areas critical to our future,” he said.
According to research firm Comscore, Google has a 65 percent share of the lucrative search market, followed by Yahoo! with 19.6 percent and Microsoft with 8.4 percent.