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Microsoft, Yahoo Agree To 10-Year Advertising Deal

Posted on: Wednesday, 29 July 2009, 10:10 CDT

Microsoft Corp and Yahoo Inc have reportedly agreed on a 10-year alliance on Internet search.

The Wall Street Journal reported news of the partnership on Wednesday, adding that Yahoo Chief Executive Carol Bartz said the new deal would benefit the company, its users, the industry and advertisers.

Microsoft and Yahoo’s combined share of the search market makes up less than half of Google’s 65 percent share, according to Comscore.

News of the deal is reminiscent of the failed $47.5 billion attempt by Microsoft to take control of Yahoo.

The agreement will give Microsoft’s Bing access to the search queries entered on Yahoo, while Yahoo would handle the responsibility of selling ads that appear alongside search results. Microsoft will pay traffic acquisition costs (TAC) to Yahoo at an initial rate of 88 percent on Yahoo sites for the first five years.

The Associated Press cited a source stating that it was unsure of whether the deal will cover billboard-style display ads, or what would be the future of Microsoft’s ad sales team.

"Those that were looking forward to a take-out, the deal today was rather disappointing," Marc Pado, U.S. market strategist for Cantor Fitzgerald & Co, told Reuters.

"The 10-year pact, it's not a bad thing. It's not as good as what investors expected."

Experts see the new deal as a directly targeted attack aimed toward industry-leading Google.

Yahoo expects the new deal to add about $500 million to its annual operating income, as well as $200 million in capital expenditure savings.

Shares in Yahoo dropped 7.5 percent following the announcement on Wednesday.

Yahoo still trails Google as the No. 2 search leader, followed by Microsoft’s Bing.

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On the Net:

• Microsoft
• Yahoo

Source: redOrbit Staff & Wire Reports

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