Yahoo, Microsoft Ad Deal Gets Fed OK

Microsoft Corp. and Yahoo Inc. have received clearance from regulators in Washington and Europe to proceed with a search partnership intended to challenge Google Inc.

The companies announced Thursday that the partnership has been approved without restrictions by the Justice Department and the European Commission. Under the 10-year agreement, Microsoft's Bing search engine will process search requests and steer search-related ads on Yahoo. Yahoo is due to get 88 percent of the revenue generated from the ads placed alongside the search results on its sites.

But Microsoft and Yahoo still await approval from regulators in Korea, Taiwan, and Japan "before the deal commences in those specific jurisdictions," the companies said in their joint statement.

The companies said they will begin implementing the deal in the coming days by shifting Yahoo's search platforms to Microsoft. They hope to move most advertisers and publishers before the 2010 holiday season, but may wait until 2011 if necessary, and expect to complete the process by early 2012.

For the immediate future, Yahoo and Microsoft are likely to be focused on clearing a lot of code issues related to their new partnership.

"Implementation of the deal is expected to begin in the coming days and will involve transitioning Yahoo's algorithmic and paid search platforms to Microsoft, with Yahoo becoming the exclusive relationship sales force for both companies' premium search advertisers globally," the statement said.

Easier said than done. ZDNet's editor-in-chief Larry Dignan noted today that managing any user disruption may be the easy part of the deal. The harder issue is how to maintain smooth relations with existing partners during what is bound to be a difficult transition period.

"Big projects like this can take away both the innovation and the focus and given the timelines proposed by Microsoft and Yahoo there isn't much room for slippage," Dignan said, adding that "what happens in the months ahead will determine the success of Microhoo."

This deal came about after the Justice Department indicated in 2008 that it would fight Yahoo's plan to team up with Google on search. That rejection led Yahoo to turn to Microsoft, which had once offered to buy Yahoo in its entirety.

A statement from the European Commission said the Yahoo-Microsoft partnership "would not significantly impede effective competition."