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Microsoft & Yahoo Add Deal

published  First Published: 29/07/2009
Article written by: Nigel Brookson
The two companies have apparently agreed to team up against Google with an online search and advertising partnership, a source familiar with the situation says.
Under the expected deal, Microsoft's new Bing search engine will power Yahoo's searches while Yahoo will handle advertising sales using Microsoft technology.
The deal is expected to be formally announced within 24 hours.
Microsoft will not pay an upfront fee to Yahoo and the focus of the deal is on sharing revenue between the two companies, said the source, who did not want to be identified because a formal announcement has not been made.
The news and details of the expected deal were first reported by AllThingsDigital and Advertising Age.
Long time coming
The two companies have talked for months about cooperating in the online advertising market, dominated by Google.
Microsoft tried to buy Yahoo last year but its $US47.5 billion ($57.2 billion) bid was rebuffed and Yahoo's attempt to seal a search advertising deal with Google fell apart under regulatory scrutiny.
The deal should give Bing a giant boost in competing with Google's search engine.
Google's search engine dominates the marketplace with 65 per cent of US internet searches, according to figures provided by research firm ComScore.
Last month, Microsoft had only 8.4 per cent of the market and Yahoo 19.6 percent.
Antitrust, privacy risks
There is a chance a deal combining the powers of the second and third-ranked search engine companies would be blocked by antitrust regulators.
Google and Yahoo dropped plans for an advertising partnership last year under opposition from the US Department of Justice.
The deal may also face privacy issues, said Colin Gillis, an analyst at Brigantine Advisors.
"Any agreement where Microsoft powers search and shares the search data to Yahoo is open to scrutiny from US and EU justice departments," Mr Gillis said.
Shareholders of both Microsoft and Yahoo have been urging the two to strike a deal for some time.
Earlier this month, activist investor Carl Icahn - who owns about 5 per cent of Yahoo and is a director on its board - spoke out in favour of a search deal as talks between the two companies appeared to regain momentum.
Yahoo chief executive Carol Bartz has previously said that any deal to spin off or combine search assets will require a partner with "boatloads of money."



Related Article: Microsoft's Focus on Search, Facebook Has Acquired FriendFeed


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