Microsoft, Yahoo Near Web Search Deal
Microsoft Corp. appears to have finally locked up rival Yahoo Inc. in a long-awaited Internet search partnership aimed at narrowing Google Inc.'s commanding lead in the most lucrative piece of the online advertising market.
The details of the Microsoft-Yahoo alliance are expected to be announced Wednesday, a person with knowledge of the talks told The Associated Press. This person spoke Tuesday night on condition on anonymity, confirming earlier reports, because the deal was not yet final.
Both Redmond, Wash.-based Microsoft and Sunnyvale, Calif.-based Yahoo declined to comment late Tuesday.
The deal may not be as far-reaching as many investors envisioned. It does not appear to call for Microsoft to pay Yahoo in advance, which could disappoint Wall Street. Yahoo Chief Executive Carol Bartz had said she would join forces with Microsoft only for "boatloads of money."
Instead, the companies would share revenue generated by search ads on their Web sites. Yahoo would use Microsoft's search engine, Bing, and it is likely - though not certain - that a "powered by Bing" message will appear on Yahoo's highly trafficked pages, according to the person who described the talks to the AP.
The companies would also use Microsoft's advertising technology to deliver appropriate ads alongside search results, while Yahoo will handle the ad sales and customer service.
The person with knowledge of the talks said it is not clear whether the final deal will also cover sales of billboard-style "display" ads, or what will happen to Microsoft's own ad sales team.
Microsoft, the world's largest software maker, has been courting Yahoo for several years in hopes of expanding its share of the lucrative online search market.
After being repeatedly rebuffed, Microsoft launched an unsolicited bid to buy Yahoo in its entirety. With co-founder Jerry Yang at the helm, Yahoo put up such staunch resistance that Microsoft withdrew its last offer of $47.5 billion, or $33 per share, nearly 15 months ago.
Yahoo shares have been sagging ever since, although they have been rising in recent weeks in anticipation of a Microsoft search deal. The stock gained 22 cents to close Tuesday at $17.22, then climbed another 17 cents in extended trading.
Microsoft is counting on Yahoo's search engine, which ranks No. 2 with a worldwide market share of 8 percent, to pose a more formidable challenge to Google, which holds 67 percent of the global audience, according to the most recent data from research firm comScore Inc. In the United States, Google's share is 65 percent, compared with roughly 20 percent for Yahoo.
Despite spending billions to upgrade its search engine, Microsoft still held just a 3 percent share worldwide and 8 percent in the U.S. in the most recent comScore tally.
The deal is likely to draw antitrust scrutiny. Last year, the U.S. Justice Department analyzed Yahoo's plans for a search advertising partnership with Google before deciding that it would give Google too much control over the market - a conclusion loudly supported by Microsoft. The opposition forced Google and Yahoo to scuttle their deal.