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Microsoft and Yahoo today sealed an internet search engine alliance to take on Google's global dominance.
Under the terms of the 10-year agreement, Yahoo will receive 88% of the revenues from all search ad sales on its site for the next five years, and can sell advertising on some Microsoft websites.
Microsoft's recently launched search engine, Bing, will power Yahoo's searches. Yahoo will be in charge of sales and customer services, while Microsoft's technology would be used to show internet surfers relevant adverts alongside their searches.
Yahoo has not received any money up-front despite chief executive Carol Bartz previously saying that she would only team up with Microsoft for “boatloads of money.” But Yahoo estimates that the deal will give a $500 million boost to annual profits. It also means that it will no longer have to invest in its own search engine technolgoy, cutting its costs by around $200 million.
They will have a combined share of the US online search advertising market of around 30%, compared with Google's 65% hold. Globally, Yahoo currently commands 8% of the market, which is dwarfed by Google's 67% audience share.
Yahoo has spurned Microsoft's advances in the past. The world's largest software maker tried to buy Yahoo for $44 billion (£ billion) last year, at a premium to its market capitalisation. Former-chief executive Jerry Yang was forced to step down after heavy criticism from shareholders for rejecting the bid.
