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Microsoft’s long Yahoo courtship ends well

Published: 30/07/2009 05:00

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Microsoft Corp has finally roped Yahoo Inc. into an Internet search partnership, capping a convoluted pursuit that dragged on for years and finally setting the stage for them to make a joint assault against the dominance of Google Inc.

A Yahoo! sign is seen in New York’s Times Square November 18, 2008.(Xinhua/Reuters File Photo)

The 10-year deal announced yesterday gives Microsoft access to the Internet’s second-largest search engine audience, adding a potentially potent weapon to the software maker’s Internet arsenal as it tries to better confront Google, the leader in online search and advertising.

Microsoft, Yahoo to enter web search deal to face Google Microsoft didn’t have to give Yahoo an upfront payment to make it happen, as many Yahoo investors had hoped.

Google tried to stop Yahoo from falling into Microsoft’s camp.

Last year, it formed its own proposed search advertising deal with Yahoo, only to be forced to retreat from that alliance after US antitrust officials threatened to sue.

The extended reach will allow Microsoft to introduce its recently upgraded search engine, called Bing, to more people.

The Redmond, Washington-based software maker believes Bing is just as good, if not better, than Google’s search engine.

A sign hangs at the Microsoft booth at the annual Consumer Electronics Show (CES) in Las Vegas, Nevada in this file image from January 9, 2009. Microsoft and Yahoo inked a 10-year web search deal, announced July 29, 2009, to challenge market leader Google, but stopped short of combining their display advertising businesses.(Xinhua/Reuters Photo)

Liu Ning, an analyst with the research firm BDA China, said the partnership between Microsoft and Yahoo will have little impact on China’s search engine market.

“Because neither company has significant business in China, the impact of the deal is near zero,” Liu said.

He said Yahoo has almost given up the Chinese market through its deal with domestic e-commerce giant Alibaba and Microsoft’s online business in “China is even smaller than that of Yahoo.”

Taking over the search responsibilities on Yahoo’s highly trafficked site gives Microsoft a better chance to convert Web surfers who had been using Google by force of habit.

“Microsoft and Yahoo know there’s so much more that search could be,” said Microsoft Chief Executive Steve Ballmer.

“This agreement gives us the scale and resources to create the future of search.”

In return for turning over the keys for its search engine to Bing and promoting it, Yahoo will get to keep 88 percent of the revenue from all search ad sales on its site for the first five years of the deal and will have the right to sell ads on some Microsoft sites.

Yahoo estimated that the deal will boost its annual operating profit by $500 million and save the Sunnyvale, California-based company about $275 million on capital expenditures a year because it won’t have to invest in its own search technology.

An unspecified number of Yahoo engineers will lose their jobs as the company scales back, Yahoo Chief Executive Carol Bartz told analysts yesterday.

“But the deal isn’t expected to close until early next year, and then it could take another two years before all the users, and the industry, and I believe it establishes the foundation for a new era of Internet innovation and development,” Bartz said Wednesday.

Under the agreement, Yahoo will have limited access to the data on users’ searches, which yield insights that can be used to pick out ads more likely to pique a person’s interest.

The value of that information is why Microsoft wants to process more search requests.

VietNamNet/Xinhuanet

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