Microsoft and Yahoo announced today that they are joining forces in a quest to compete against Internet giant Google, signing a 10-year agreement that will allow the two companies to share search engine technology and advertisement revenue. Google's initial response was, "you know competition is good for this market".

Microsoft plans to control the technology and results for Yahoo’s power search, while Yahoo continues to organize ad sales and monitor customer service. Yahoo’s audience will triple Bing’s US market share by 28% instantly.

Last year, Microsoft was so desperate to shore up its lagging position in Web-search advertising that it offered more than $45 billion to buy Yahoo, the No. 2 search player. Now, not buying Yahoo is looking like one of the smartest things Microsoft ever did. Instead of spending hordes of cash (and grappling with a messy integration of another company's employees, culture and technology) Microsoft got what it wanted from Yahoo for a modest amount of money and a lot fewer headaches.

Under the terms of the deal, aimed at creating a stronger competitor to Google Inc, Microsoft's new Bing search engine will power queries on Yahoo's sites. In return, Microsoft will pay Yahoo 88 percent of revenue from advertisements generated from these sites. In other words, Yahoo will use Microsoft's Bing search engine and collect 88% of the advertising revenue for the first five years of the 10-year pact.

In theory, that means Microsoft gets more traffic to refine its search technology and build up its ad base, while Yahoo gets revenue from search ads without the expense of managing its own search engine.

The deal appears to end a long saga between the companies, after Yahoo rebuffed Microsoft's $47.5 billion takeover bid last year. Yahoo became open to the idea of syndication with Microsoft after the company’s reorganized search engine Bing gained momentum early on in June this year.

"It's a win-win deal from my perspective," he said, adding that he was surprised by the steep fall in Yahoo's shares.

Yahoo's 88 percent share of search ad revenue is a "big number", said Ballmer, considering the company will have a "zero percent" cost of obtaining that revenue.

For Microsoft, he said the deal means it gets more Internet traffic, enabling it to refine its search technology, which should lead to more interest from ad buyers and hence better prices for its ads.

Comments :

0 comments to “Bing-hoo!”

Post a Comment

What are other's reading?