They finally did it.
Microsoft and Yahoo have finally announced a long-awaited search partnership. As part of the new 10-year deal Microsoft's recently launched Bing product will power Yahoo's search, and Yahoo's sales force will sell search ad inventory for both companies globally.
The joint announcement, issued early Wednesday (July 29) ends a year-and-a-half dance between the two companies, which began in early 2008 when Microsoft attempted an outright purchase of Yahoo.
Instead, both companies will continue to be managed separately, maintaining distinct display ad sales teams (despite some speculation to the contrary). In the end, the partnership is all about establishing a stronger number two competitor to Google, which has in recent month seen its share of the search market in the U.S. exceed 65 percent. Together, Yahoo and Microsoft should account for roughly 30 percent of searches.
That combined share should provide a huge boon to Bing, Microsoft's recently launched consumer search brand (its previous search product had long languished below 10 percent market share)-as well as adCenter, the Microsoft online ad platform, which both companies will now employ for search.
"Success in search requires both innovation and scale," said Microsoft CEO Steve Ballmer. "With our new Bing search platform, we've created breakthrough innovation and features. This agreement with Yahoo will provide the scale we need to deliver even more rapid advances in relevancy and usefulness. Microsoft and Yahoo know there's so much more that search could be."
From Yahoo's perspective, the deal should provide the embattled Web giant with a solid, consistent new revenue stream. For the first five years of the pact, Yahoo will take home 88 percent of search revenue generated on its own sites.
"This agreement comes with boatloads of value for Yahoo, our users, and the industry, and I believe it establishes the foundation for a new era of Internet innovation and development," said Yahoo CEO Carol Bartz.
They finally did it.