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Microsoft, Yahoo! agree on Internet search partnership
(Agencies)
Updated: 2009-07-30 06:39 SAN FRANCISCO: Microsoft finally persuaded Yahoo to surrender control of the Internet's second most popular search engine and join it in a daunting battle -- taking on the overwhelming dominance of Google in the online advertising market.
A 10-year deal announced Wednesday gives Microsoft its best shot yet to show its new search technology, Bing, is as good as or better than Google's. Microsoft also hopes to use Yahoo to divert sales from Google, which generates more than $20 billion a year from ads. Gaining access to Yahoo's audience would instantly more than triple Bing's US market share to 28 percent. That's still a far cry from the remarkable 65 percent of US searches handled by Google, according to the research firm comScore Inc.
While the agreement shapes up as a potential boon for Microsoft, it was greeted in the stock market as a letdown for Yahoo. Just 14 months ago, Microsoft dangled $9 billion in front of Yahoo in an attempt to forge a search advertising partnership, only to be rebuffed. Yahoo had also turned down Microsoft's $47.5 billion bid to buy the entire company. Yahoo has been struggling so badly since then that Microsoft isn't paying any money in advance. Instead, it will give Yahoo 88 percent of the search ad sales made on its Web site, above the usual commission of 70 to 80 percent. By spending less on its own search technology, Yahoo expects to boost its annual operating profit by about $500 million — but not until 2012, when the two companies expect to have all the pieces of a complex technological puzzle in place. "I think a lot of people are kind of looking at the numbers and seeing a lot of question marks where they expected to see exclamation points," said Scott Kessler, a Standard & Poor's equity analyst. |
