Microsoft and Yahoo to join forces in deal to challenge Google dominance

The internet search engine rivals Microsoft and Yahoo! have this morning announced a collaborative deal to challenge the dominance of search engine giant Google.

After the collapse of a bold $47 Billion attempt by Microsoft to take over Yahoo! last year failed many industry commentators had expected the relationship between the two rivals to become hostile after Yahoo! rejected Microsoft’s mega deal offer. However last year’s fall-out appears to have been put to one side as the two technology giants reached agreement with a clear distinction of duties which plays to each of their strengths. An attempt by Google to strike a deal with Yahoo! also failed last November, when in the face of stiff opposition by the US Department of Justice, Google withdrew from negotiations.

Early indications suggest that under the new deal, Microsoft will provide search technology to power Yahoo!’s web sites. Interestingly this comes just months after Microsoft unveiled its new ‘Bing’ platform which has received widespread acclaim from industry pundits who have time and again given short shrift to the many previous attempts Microsoft have made to play catch-up with the market leading Google. As Bing continues to tweak its technology and make improvements to its algorithm many believe that it will eventual be able to establish itself as a serious rival to Google.

New management within Yahoo!, headed up by Carol bantz their new Chief Executive are said to have championed the deal which sees the company benefiting from 88% of the ad revenue generated from the ten year agreement.

This deal sees the duo commanding up to 28% of the American market and slightly less in the UK. Annual revenues are said to be worth circa $12 Billion in the US alone, of which Google dominates a massive two thirds of the market.

Online marketers are likely to be cheered by the alliance which will provide a more credible platform with bigger market share, thus slightly eroding the powerhouse Google’s monopoly as the world’s largest advertising vendor. In the past marketers have overlooked both Yahoo! and Microsoft because the pairs’ market share was considered too small to bother with. Now, effectively three times the size, advertisers will be lining up to negotiate with the enlarged player.

"This deal will make for an interesting new element of competition in the paid search space as advertisers recognise that a sizeable chunk of the search market is now controlled by a third party", commented Fuse Optimisation Ltd’s, Head of Search, Mike Page.