Microsoft and Yahoo make their move in search of Google's crown

US pair sign 10-year deal in attempt to break rival's search engine monopoly

They may not be quaking at Google just yet, but the internet search landscape looked set for significant upheaval last night after Microsoft and Yahoo announced they had agreed to combine their resources, technology and expertise to grab a bigger slice of the lucrative cyber-inquiry market.

Some details remained outstanding, and the agreement is subject to approval by competition regulators in Washington DC, but the two companies said they were confident of closing the 10-year deal in early 2010. Together, they reason, they have a better chance of challenging Google, which has grown to dominate search business on the web.

"We face a formidable competitor in one aspect, and that is search," Yahoo's chief executive Carol Bartz said in a conference call. "What this deal is really about is scale." However, she was forced instantly to counter early observations from Wall Street that the deal seemed less favourable to her company than to Microsoft. Shares in Yahoo slipped in early trading.

Even for Microsoft, which saw a boost in its sale price, the arrangement is a piddling version of what it first had in mind for Yahoo, namely to buy the company outright. Its former CEO and co-founder, Jerry Yang, put paid to Microsoft's offer of $47.5bn before stepping down last November.

But Microsoft has reason to cheer. The company was emboldened by praise received after the recent launch of its own answer to Google called "Bing". Under this deal, Bing will be the chosen technology for the joint venture. Yahoo will license its technology to Microsoft, allowing it to use any parts it deems useful, and will handle all advertising sales for both companies.

There is also no upfront payment to Yahoo as some analysts had expected. Instead, a revenue-sharing agreement will be put in place with Microsoft paying Yahoo 88 per cent of search revenue from each of their sites.

Even together, the two companies will hardly have the heft to displace Google easily. According to Comscore, a research firm, Yahoo and Microsoft together accounted for less than half of Google's existing 65 per cent share of the US market in June. Microsoft remains the baby in the field, taking credit for just 8.4 per cent of searches last month, while Yahoo accounted for just under 20 per cent.

But it gives the companies the scope to flex their internet search muscle. It will be up to Google to decide how seriously it takes the new challenge. "They should be worried," Danny Sullivan, editor of, asserted yesterday. "It's going to give Microsoft a much bigger share of the search market in one fell swoop."

Steve Ballmer, the chief executive of Microsoft, conceded that the deal will face "opposition" from a certain "competitor", which may lobby the regulators to stop the agreement in its tracks on competition grounds, but he predicted that such an effort would fail.

"We have a good case for how this improves competition. Through this agreement with Yahoo, we will create more innovation in search, better value for advertisers and real consumer choice in a market currently dominated by a single company," Ballmer said, in a joint statement announcing the agreement.

If the deal goes through, internet surfers will not be aware of much difference. The Yahoo sites will still offer search capacity, and the on-screen Yahoo branding will look exactly the same. Only the most observant will notice the small qualifier announcing that each search is "powered by Bing".

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
  • Get to the point
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.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Loren Hughes: Financial Accountant

£45,000 - £55,000: Loren Hughes: Are you looking for a new opportunity that wi...

Sheridan Maine: Finance Analyst

Circa £45,000-£50,000 + benefits: Sheridan Maine: Are you a newly qualified ac...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor