Yahoo! and Microsoft to seal deal to rival Google - Times Online

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Source: Times Online:

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Microsoft and Yahoo! have finally agreed an online search and advertising partnership in a bid to rival Google.

The revenue sharing deal is expected to be announced later today, more than a year after Yahoo! rejected a $47.5 million (£29 million) takeover bid from Microsoft and Yahoo!'s attempt to strike a search advertising deal with Google fell apart under regulatory scrutiny.

Under the expected deal, Microsoft's new Bing search engine will power Yahoo!'s searches while Yahoo! will handle advertising sales. The companies will use Microsoft's advertising technology to deliver appropriate ads alongside search results.

The deal may not be as far-reaching as many investors expected. It does not appear to call for Microsoft to pay Yahoo! in advance, which could disappoint Wall Street. Carol Bartz, Yahoo! chief executive, had said she would join forces with Microsoft only for 'boatloads of money'.

Microsoft is counting on Yahoo!'s search engine, which ranks as the second largest in the world with a global market share of 8 per cent, to pose a more formidable challenge to Google, which holds 67 per cent of the global audience, according to the most recent data from the research company comScore. In the US, Google's share is 65 per cent, compared with 20 per cent for Yahoo!.

Despite spending billions to upgrade its search engine, Microsoft still held just a 3 per cent share worldwide and 8 per cent in the US in the comScore rankings.

There is a chance a deal combining the powers of the second and third-ranked search engine companies would be blocked by antitrust regulators.

Shareholders of both Microsoft and Yahoo! have been urging the two to strike a deal for some time. Earlier this month, the activist investor Carl Icahn, who owns about 5 per cent of Yahoo! and is a director on its board, spoke out again in favour of a search deal, as talks between the two companies appeared to regain momentum.

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