Microsoft & Yahoo Deal Gets One Step Closer

As you will recall, Microsoft and Yahoo announced an agreement back in July to team up in hopes of improving their competitive position against Google. Now that the deal has been unconditionally cleared by the U.S. Department of Justice and the European Commission, the partnership is one step closer to reality.

Under the terms of the agreement, Bing will become the search engine for both Microsoft and Yahoo sites. Yahoo, in turn, will focus on attracting the big advertisers. The automated auction of search ads that will be used on both companies' sites will be handled by Microsoft; Microsoft will pay Yahoo a portion of search ad sales generated on Yahoo pages.

By combining forces, Microsoft and Yahoo are creating a single conduit for advertisers to access customers on both sites. In doing so, the companies are hoping to become a credible alternative to Google.

Microsoft has already made some progress in the search engine market, having picked up 3.3 points of market share since the Bing search engine was launched last June. In an interview with Reuters earlier this month, Microsoft's Yusuf Mehdi said, "Really now, the goal is about share gain. If we grow share, we will grow our way into profitability, and we have confidence we can do that."

Now that the agreement has been met with regulatory approval, Microsoft can begin the task of putting Bing into Yahoo sites. The companies hope to have the partnership fully operational by the end of this year in the U.S. The partnership should be globally complete by early 2012. The deal had previously been approved by regulators in Australia, Brazil, and Canada. The companies are still working with regulators in Korea, Taiwan, and Japan.