REDMOND, Wash.—In a quite expected move, Microsoft and Yahoo! on Wednesday announced a deal that will find the two companies taking on search engine giant Google.
Microsoft's still-new Bing search engine will power Yahoo's search site, and Yahoo will sell premium search advertising services for both companies, reports Network World.
The deal is said to have take nearly a year and a half to hammer out and grew out of Microsoft's bid to buy Yahoo! in February 2008.
Microsoft's Bing already appears to be a success since its recent launch while Yahoo! has a larger network of advertisers, so both firms see the 10-year search agreement as mutually beneficial. Microsoft will have an exclusive license to Yahoo's core search technologies as well as the ability to integrate them into Bing, according to a joint statement.
One of the more interesting terms of the deal is that Microsoft will pay Yahoo! traffic acquisition costs at an initial rate of 88 percent of search revenue generated on owned and operated sites during the first five years of the agreement. Meanwhile, Yahoo! will continue to syndicate its existing search affiliate partnerships.
Yahoo! believes the partnership will generate $500 million in operating income and a savings of about $200 million in capital expenditures, along with adding $275 million to annual operating cash flow.
In June, Bing added an adult content domain for explicit searches.