Microsoft and Yahoo! have been in talks with each other for a possible partnership for ages now, but they have finally reached a mutually acceptable agreement.
According to sources, Microsoft has declined to make any upfront payment or revenue guarantee, which Yahoo! had initially asked for.
Microsoft search technology will now be used on all Yahoo! sites. Yahoo! will also be able to sell search ads on its own sites as well as on Bing through the Microsoft adCenter technology.
The deal, though not quite as all encompassing as expected, gives Yahoo! the control it wanted over its advertisers and consumer data.
According to details available, the partnership for online search and advertising will be for a period of 10 years.
In a joint statement issued by the companies, the deal was forecasted to increase Yahoo’s! annual operating income by about $500 million, while also reducing their capital expenditure by$200 million.
The deal is likely to give Microsoft a larger share of the search market, thus helping it to fight rival Google. According to the latest reports from comScore, Google has about 65% of the U.S. search market, while Microsoft Bing has 8.4% and Yahoo! has 19.6%. Jointly the two companies will account for about 30% of the market share.