Recently, Microsoft and Yahoo have now received the regulatory clearance from United States and European Union regulatory bodies to form the Yahoo! and Microsoft Search Alliance. This will allow the alliance to compete with the Search engine leader today, Google, to some extent.
This 10 year deal was agreed between Microsoft and Yahoo in last July, which is the largest effort Microsoft has taken to bring a good competition with the rival Google in the online business. Microsoft has lost almost $5 billion in the last 4 years in the online business.
With the introduction of Bing, an upgrade to the Live, Microsoft could pickup 3.3 points of marketshare in the online search market.
According to comScore reports in January 2010 Yahoo handled 17 percent of U.S. Internet searches, while Microsoft took 11.3 percent . Theoretically, that would now give Microsoft over 28 percent of search traffic, against Google’s 65.4 percent. Globally, Google is even more dominant, with 90 percent of the search market compared with 7.4 percent for a combined Yahoo and Bing, according to November data from Web research firm StatCounter.
The battle for online search ads is only one front on a sprawling war for revenue between Microsoft and Google, which also encompasses operating systems and mobile phones. But neither has yet managed to compete on equal terms in each other’s core market. Google’s efforts to take the browser market did not take off much with its Chrome browser, especially in the enterprise environment.
At this point in time, the deal between Microsoft and Yahoo may not have any impact on the Google’s business model nor their search market revenues in the near term. The deal, cleared unconditionally by the U.S. Department of Justice and the European Commission on Thursday, is not expected to impact Microsoft’s bottom line, but could lay the foundation of a profitable online business.
The deal means Bing becomes the search engine for Microsoft and Yahoo sites, while Yahoo focuses on attracting big advertisers.
Microsoft will handle the automated auction of search ads for use on both companies’ sites, and pay Yahoo a portion of search ad sales generated on Yahoo pages.
Microsoft is hoping that by making itself a single conduit for advertisers to access customers on both sites, it will become a credible alternative to Google.
The companies aim to get the partnership fully operational in the United States by the end of this year, with the transition of advertisers taking place before the holiday shopping season, if possible. The partnership should be globally complete by early 2012.
The deal had already been cleared by regulators in Australia, Brazil and Canada, but needed U.S. and European approval to take effect. The companies said they are still working with regulators in Korea, Taiwan and Japan.