Yahoo Ad Deal Struck

After nearly three years of discussions, Microsoft has struck a 10-year deal with second-place Web search provider Yahoo, under which Yahoo will exit the search business and use Microsoft’s Bing search technology and adCenter search-advertising technology on its Web sites. The deal will help Microsoft build much-needed scale for Bing and adCenter, which should increase advertising relevance and lead to more revenue per search (RPS), while Yahoo will save billions in infrastructure and development costs. Advertisers may also benefit from having a stronger number-two player in the search market. However, the deal will take up to two years to complete.

The Costs of Delay

The search and search-advertising deal between Microsoft and Yahoo was announced on July 23, 2009. If approved by regulators, it will conclude more than three years of negotiations between the two companies, during which industry leader Google continued to gain additional search market share, building on its already significant lead. (For a timeline of the negotiations and market share statistics over the years, see the sidebar “Timeline: Microsoft and Yahoo“.)