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.

Life and Style
ebookNow available in paperback
Life and Style
ebooksA superb mix of recipes serving up the freshest of local produce in a delicious range of styles
Life and Style
A still from a scene cut from The Interview showing North Korean leader Kim Jong-un's death.
'That's the legal bit done. Now on to the ceremony!'
voicesThe fight for marriage equality isn't over yet, says Siobhan Fenton
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Gadgets & Tech

    Recruitment Genius: Technical Support Analyst / Helpdesk Support Analyst

    £16000 - £19000 per annum: Recruitment Genius: Our client is the UK's leading ...


    £20000 - £30000 per annum + OTE £50k: SThree: SThree are a global FTSE 250 bus...

    SThree: Trainee Recruitment Consultant - LONDON

    £20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

    Day In a Page

    Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

    Clocks, rifles, swords, frogmen’s uniforms

    Surrounded by high-rise flats is a little house filled with Lebanon’s history
    Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

    Four months after the bombardment, Gaza’s wounds are yet to heal

    Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
    Gastric surgery: Is it really the answer to the UK's obesity epidemic?

    Is gastric surgery really the answer to the UK's obesity epidemic?

    Critics argue that it’s crazy to operate on healthy people just to stop them eating
    Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

    Homeless Veterans appeal: Christmas charity auction

    Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
    Pantomime rings the changes to welcome autistic theatre-goers

    Autism-friendly theatre

    Pantomime leads the pack in quest to welcome all
    The week Hollywood got scared and had to grow up a bit

    The week Hollywood got scared and had to grow up a bit

    Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

    Panto dames: before and after

    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
    Thirties murder mystery novel is surprise runaway Christmas hit

    Thirties murder mystery novel is surprise runaway Christmas hit

    Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
    Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

    Anne-Marie Huby: 'Charities deserve the best'

    Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
    The botanist who hunts for giant trees at Kew Gardens

    The man who hunts giants

    A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
    The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

    The 12 ways of Christmas

    We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
    Birdwatching men have a lot in common with their feathered friends, new study shows

    The male exhibits strange behaviour

    A new study shows that birdwatching men have a lot in common with their feathered friends...
    Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

    Famous diaries: Christmas week in history

    Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
    From noble to narky, the fall of the open letter

    From noble to narky, the fall of the open letter

    The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
    A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

    A Christmas ghost story by Alison Moore

    The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'