Microsoft-Yahoo! Deal Is Official

MicrosoftLogo.jpgThe partnership between Yahoo! and Microsoft became official Wednesday morning, with Microsoft’s Bing powering search functions on Yahoo! while Yahoo! becomes the exclusive worldwide relationship-sales force for premium-search advertisers for both companies.

Under terms of the 10-year agreement, Microsoft gains an exclusive 10-year license to Yahoo!’s core search technologies and the ability to integrate them into its existing Web-search platforms. Bing, meanwhile, will be the exclusive algorithmic-search and paid-search platform for Yahoo! sites.

Self-serve advertising for both companies will be fulfilled by Microsoft’s AdCenter platform, and prices for all search ads will continue to be set by AdCenter’s automated auction process, the two companies said, adding that each company will maintain its own separate display-advertising business and sales force.

YahooLogo.jpgMicrosoft will pay traffic-acquisition costs to Yahoo! at an initial rate of 88% of search revenue generated on Yahoo!’s owned-and-operated sites during the first five years of the agreement, and it will guarantee Yahoo!’s O&O revenue per search in each country for the first 18 months following initial implementation in that country.

Microsoft CEO Steve Ballmer said:

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. Success in search requires both innovation and scale. With our new Bing search platform, we’ve created breakthrough innovation and features. This agreement with Yahoo! will provide the scale we need to deliver even more rapid advances in relevancy and usefulness. Microsoft and Yahoo! know there’s so much more that search could be. This agreement gives us the scale and resources to create the future of search.

Yahoo! CEO Carol Bartz added:

This agreement comes with boatloads of value for Yahoo!, our users and the industry, and I believe it establishes the foundation for a new era of Internet innovation and development. Users will continue to experience search as a vital part of their Yahoo! experiences and will enjoy increased innovation thanks to the scale and resources this deal provides. Advertisers will also benefit from scale and enjoy greater ease of use and efficiencies working with a single platform and sales team for premium advertisers. Finally, this deal will help us to increase our investments in priority areas in winning audience properties, display-advertising capabilities and mobile experiences.