Microsoft And Yahoo Finally Strike Deal

Well it seems that both Yahoo and Microsoft have reached an agreement regarding their search deal. You might remember that it has been close to two years that both companies have been going at each other with Microsoft even making a $44 billion bid for the embattled search engine.

Under the new deal however, both companies will remain separate and each will carry on their normal lives without the corporate wedding thing. But for the next ten years, both Yahoo and Microsoft will team up efforts to take on Google and their huge market dominance. Both companies combined will control 30% of the search engine market.

Yahoo, who has been bleeding fiscally for the past few years, will gain control of the ad revenue of both companies, which they claim will boost annual revenue of the company by half a billion dollars. It will also cut capital expenditure by a whopping $200 million while increasing operating cash flow by $275 million. Yahoo will be allowed to keep 88% of their ad sales during the first 5 years and Microsoft will guarantee a certain level of search revenue for Yahoo.

On the other side of the spectrum, Microsoft will control the actual technology used to serve the web results. Microsoft will roll out its “new” Bing search platform onto both companies search engines while incorporating some of Yahoo’s existing technologies such as Panama-ad-selling tool.

All in all the deal is expected to go into full effect within the next 2 years, once it passes regulatory checks that is. As it stands, it seems like the FCC won’t be bothered by such a partnership as both companies do seem to be taking quite a beating from the big “G.” And more importantly, both companies will remain separate during the entire love affair.

Of course its too early to tell if this will work out for both companies in the long run, but as it stands, Microsoft and Yahoo are bleeding in the SE department and something like this looks more promising then ever before. I’m not expecting Yahoo and Microsoft to snap up an extra 20% of the search engine market within the next few years, but with Google’s hands in everything other then improving their search results I think it is possible for a small dent to be made in Google’s dominance.

In the end, it will be Microsoft and Yahoo who will have to prove to customers that their search engines are on par with Google. At least for now no one can complain about Bing’s image and video search, hopefully they bring up their website results to par.

So what are your thoughts? Should Google be frightened or is Microsoft and Yahoo just another failed attempt to unseat the undisputed king? Let me know in the comments below.

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