Yahoo!, Microsoft Ready to Challenge Google Dominance

Antitrust regulators in the United States and Europe have blessed the pending Microsoft-Yahoo! search deal, freeing the two companies to challenge dominant rival Google Inc.

The approval comes the same week Web analytics firm Compete said Yahoo! (YHOO) now ranks as the third most-visited site in the United States. It was No. 2, but social networking site Facebook has stolen that position. Google (GOOG) remains No. 1.

Yahoo!’s eroding market share is nothing new or secret, and it’s the basis of the company’s push to reinvent itself. To that end, Microsoft (MSFT) will power Yahoo! search results with its Bing algorithms; Yahoo!, meanwhile, will develop unique content and sell the majority of advertising – for which Microsoft reportedly will take home all of the revenue.

And according to other details leaked several months ago, Microsoft further gets exclusive licensing on Yahoo!’s search technology and, most of all, does not have to front a payment to Yahoo!. Instead, Microsoft will pay Yahoo! for traffic acquisition costs; initially, that amounts to 88 percent of search revenue generated on Yahoo!’s Web sites, over the first five years of the 10-year agreement.

Nonetheless, the Bing addition alone should help Yahoo! get back on its feet. The Microsoft search platform has attracted thousands of new users for each of the past eight months.

So now the real work begins. Yahoo! and Microsoft said in a joint statement they hope to have the search aspect completed in at least the United States by the end of this year. They’d also like to have advertisers and publishers squared away before the holiday buying rush but may wait to transition those customers until 2011. All customers and partners worldwide should be on the Bing system by early 2012, the companies said.

And that’s good news for all parties involved, executives said.

“Yahoo! gets to do what we do best: combine our science and technology with compelling content to build personally relevant online experiences for our users and customers,” Yahoo! CEO Carol Bartz said in a prepared statement.

Microsoft CEO Steve Ballmer agreed.

“I believe that together, Microsoft and Yahoo! will promote more choice, better value and greater innovation to our customers as well as to advertisers and publishers,” he said.

Thursday’s news alleviates some observers’ fears that the Microsoft-Yahoo! pact, announced in July 2009, might never come to fruition. That’s because federal authorities a year earlier had rejected a similar proposal between Google and Yahoo!. The approvals are intact, however, although Korea, Taiwan and Japan have yet to give their consent. But Yahoo! and Microsoft don’t have to wait on those countries’ agreement to implement their partnership.


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