Yahoo, Microsoft reach deal

Yahoo and Microsoft announced a deal Wednesday that the two companies say will give advertisers and users a strong alternative to the dominant Internet search company, Google.

Under terms of the agreement, Yahoo will use Microsoft’s recently introduced search engine, “Bing,” on its Web sites, while Yahoo will take over selling premium search advertising for both companies around the world.

In a statement, Yahoo chief executive Carol Bartz said the deal will generate “boatloads of value for Yahoo!, our users and the industry,” famously recalling a line she had previously used to describe what it would take for her to reach a deal with Microsoft.

And Microsoft CEO Steve Ballmer made clear the ultimate target of this deal: Google. “Through this agreement with Yahoo!, we will create more innovation in search, better value for advertisers and real consumer choice in a market currently dominated by a single company,” he said in a statement.

Under the terms of the deal, both companies will use Microsoft’s AdCenter platform for so-called “self-serve” search advertising, in which advertisers bid for search terms in an auction process. Yahoo’s sales force will take over premium search advertising for both companies around the world. Yahoo and Microsoft will share revenue from paid searches.

Each company will maintain separate display advertising sales forces. The deal does not cover the companies’ Web properties and products such as e-mail and instant messaging.

Microsoft will pay Yahoo for traffic generated on Yahoo’s network of sites, both those it owns as well as affiliates; for the first five years of the agreement, at a rate of 88 percent of search revenue generated on sites owned and operated by Yahoo.

The deal is expected to be fully implemented over the next two years and generate $500 million in cost savings for Yahoo. Assuming the deal receives regulatory approval, the two companies said they expect the deal to close in early 2010.

(c) 2009, San Jose Mercury News (San Jose, Calif.). Source: McClatchy-Tribune Information Services.