Microsoft steps up search assault on Google

Microsoft's assault on search engine leader Google took a major step forward yesterday as US and European regulators cleared the software company's search partnership with Yahoo.

The 10-year deal, struck last July, is the biggest effort yet by Microsoft to establish an online business to rival Google, an area where Microsoft has lost $5 billion (£3.2 billion) over the last four years.



"Microsoft really has room to throw money at this," said Kim Caughey, senior analyst at Fort Pitt Capital Group. "I think it can work. If they can make inroads in specific target areas, they could have something positive to report."



Microsoft has already made some progress with its search engine, Bing, picking up 3.3 points of market share since its launch last June. But Bing is not likely to "push Google off a very big pedestal any time soon," said Caughey.



The battle for online search ads is only one front on a sprawling war for revenue between Microsoft and Google, which also encompasses operating systems and mobile phones. But neither has yet managed to compete on equal terms in each other's core market.



"In terms of our modeling, we really don't see any impact from Microsoft-Yahoo on our Google numbers," said Clayton Moran, an analyst at The Benchmark Co.



"It doesn't change much in terms of the competitive dynamics of the industry right away," he warned. "From a Google perspective, looking out over the next couple of years, it's a nonevent."



The deal, cleared unconditionally by the Department of Justice and the European Commission on Thursday, is not expected to impact Microsoft's bottom line, but could lay the foundation of a profitable online business.



"Really now, the goal is about share gain. If we grow share, we will grow our way into profitability, and we have confidence we can do that," said Microsoft's Yusuf Mehdi, who is charged with making Bing and the MSN portal a financial success, in an interview with Reuters earlier this month.



Microsoft shares rose 1.2 per cent and Yahoo's rose 0.7 per cent on Nasdaq, in a broadly higher tech market.



The Justice Department's Antitrust Division said the deal was unlikely to substantially lessen competition.



US market participants had expressed support for the partnership as a way to create a more viable alternative to Google, the division said in a statement issued late Thursday.



Google, which did not oppose the partnership, did not comment specifically on the regulatory approval but said that there has always been "robust" competition in the search ad business. Its shares rose 1.1 per cent.



The deal means Bing becomes the search engine for Microsoft and Yahoo sites, while Yahoo focuses on attracting big advertisers.



Microsoft will handle the automated auction of search ads for use on both companies' sites, and pay Yahoo a portion of search ad sales generated on Yahoo pages.



Microsoft is hoping that by making itself a single conduit for advertisers to access customers on both sites, it will become a credible alternative to Google.



Last month Yahoo handled 17 per cent of US internet searches, while Microsoft took 11.3 per cent, according to comScore. Theoretically, that would now give Microsoft over 28 per cent of search traffic, against Google's 65.4 per cent.



"At 30 points we are now a credible option, so that number matters," said Mehdi earlier this month.



Globally, Google is even more dominant, with 90 per cent of the search market compared with 7.4 per cent for a combined Yahoo and Bing, according to November data from Web research firm StatCounter.

The Microsoft-Yahoo deal was broadly expected to gain approval, but some had thought the companies might have to alter the deal's terms.



The partnership took months to hammer out last year. It followed Microsoft's aborted $47.5 billion (£30.8 billion) Yahoo takeover attempt the year before. Google abandoned its own advertising deal with Yahoo in 2008, which Microsoft opposed, under pressure from the US Justice Department.



Approval means Microsoft can begin the task of putting its Bing search engine into Yahoo sites. Neither company has laid out exactly how Yahoo's new search pages will look, but they will essentially be Bing searches with some customization of results by Yahoo.



The companies aim to get the partnership fully operational in the United States by the end of this year, with the transition of advertisers taking place before the holiday shopping season, if possible. The partnership should be globally complete by early 2012.



The deal had already been cleared by regulators in Australia, Brazil and Canada, but needed US and European approval to take effect. The companies said they are still working with regulators in Korea, Taiwan and Japan.

Arts and Entertainment
arts + entsWith one of the best comic roles around, it's no wonder she rarely bothers with films
News
people
News
i100
News
Davis says: 'My career has been about filling a niche - there were fewer short actors and fewer roles – but now I'm being offered all kinds of things'
PeopleWarwick Davis on Ricky Gervais, Harry Potter and his perfect role
PROMOTED VIDEO
Life and Style
ebookA wonderful selection of salads, starters and mains featuring venison, grouse and other game
Life and Style
ebookAn evocation of the conflict through the eyes of those who lived through it
Voices
A Russian hunter at the Medved bear-hunting lodge in Siberia
Save the tigerWildlife charities turn to those who kill animals to help save them
Sport
Frank Lampard will pass Billy Wright and equal Bobby Charton’s caps tally of 106 caps against
sportFormer Chelsea midfielder in Etihad stopgap before New York contract
News
i100
Sport
Usain Bolt of Jamaica smiles and shakes hands with a competitor after Jamaica won their first heat in the men's 4x100m relay
sport
News
Chancellor George Osborne, along with the Prime Minister, have been 'complacently claiming the economy is now fixed', according to shadow Chancellor Ed Balls
i100... which is awkward, because he is their boss, after all
Arts and Entertainment
The first film introduced Daniel Radcliffe to our screens, pictured here as he prepares to board the train to Hogwarts for the first time.
booksHow reading Harry Potter helps children grow up to be gay-friendly
Life and Style
A small bag of the drug Ecstasy
Health
News
i100
Life and Style
Floral-print swim shorts, £26, by Topman, topman.com; sunglasses, £215, by Paul Smith, mpaulsmith.co.uk
FashionBag yourself the perfect pair
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Gadgets & Tech

    (Senior) IT Support Engineer - 1st-3rd Line Support

    £40000 per annum: Ashdown Group: A successful IT service provider that has bee...

    Recruitment Consultant - Bristol - Computer Futures - £18-25k

    £18000 - £25000 per annum + Commission: SThree: Computer Futures are currently...

    Trainee Recruitment Consultant - Real Staffing - Leeds - £18k+

    £18000 - £27000 per annum + Commission: SThree: Sales - Trainee Recruitment Co...

    Trainee Recruitment Consultant - Manchester - Progressive Rec.

    £18000 - £23000 per annum + Commission: SThree: Progressive Recruitment are cu...

    Day In a Page

    Save the Tiger: Meet the hunters tasked with protecting Russia's rare Amur tiger

    Hunters protect Russia's rare Amur tiger

    In an unusual move, wildlife charities have enlisted those who kill animals to help save them. Oliver Poole travels to Siberia to investigate
    Transfers: How has your club fared in summer sales?

    How has your club fared in summer sales?

    Who have bagged the bargain buys and who have landed the giant turkeys
    Warwick Davis: The British actor on Ricky Gervais, how the Harry Potter set became his office, and why he'd like to play a spy

    'I'm a realist; I know how hard this business is'

    Warwick Davis on Ricky Gervais, Harry Potter and his perfect role
    The best swim shorts for men: Bag yourself the perfect pair and make a splash this summer

    The best swim shorts for men

    Bag yourself the perfect pair and make a splash this summer
    Has Ukip’s Glastonbury branch really been possessed by the devil?

    Has Ukip’s Glastonbury branch really been possessed by the devil?

    Meet the couple blamed for bringing Lucifer into local politics
    Dress the Gaza situation up all you like, but the truth hurts

    Robert Fisk on Gaza conflict

    Dress the situation up all you like, but the truth hurts
    Save the tiger: Tiger, tiger burning less brightly as numbers plummet

    Tiger, tiger burning less brightly

    When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
    5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

    In grandfather's footsteps

    5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
    Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

    Martha Stewart has flying robot

    The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
    Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

    Do women cyclists need 'pootling lanes'?

    Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
    A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

    A tale of two presidents

    George W Bush downs his paintbrush to pen father’s life story
    Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

    The dining car makes a comeback

    Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
    Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

    Gallery rage

    How are institutions tackling the discomfort of overcrowding this summer?
    Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

    Eye on the prize

    Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
    Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

    Women's rugby

    Tamara Taylor adds fuel to the ire in quest to land World Cup