The search engine deal between Microsoft and Yahoo has finally received official approval – regulatory authorities from both the European Commission and the US have given clearance for the tie-up. According to the regulators, the deal does not hinder effective competition in any significant manner.
Crafted around July last year, the deal was for Microsoft to buy Yahoo’s search engine marketing business and Yahoo to make use of Microsoft’s Bing search engine. Both firms would be sharing the revenues generated from this joint work. The tie-up is expected to give Microsoft a bigger chunk of the search engine industry, which is currently more-or-less owned by Google. Yahoo on the other hand benefits from selling off its ailing search engine business and joining hands with a stronger international player.
As per the terms of the decade long agreement, both Microsoft and Yahoo will now use the Bing search engine, while Yahoo will pass on its main advertising sales business to Bing. In return for using Bing, Yahoo will pay 12% of the advertising revenue generated from its website to Microsoft for the first five years of the deal and keep the remaining 88% for itself.
Clearing their stand, the European Commission said that even after joining hands, Microsoft and Yahoo would account for less than 10% of Europe’s search engine market against Google’s 90%. This deal would only increase competition by making Microsoft a stronger player against Google. These sentiments have been portrayed by the US Department of Justice as they too have backed the deal.
Reacting to the regulatory approval, Microsoft CEO Steve Ballmer said that the tie-up is “an exciting milestone”. “I believe that together, Microsoft and Yahoo will promote more choice, better value and greater innovation to our customers as well as to advertisers and publishers,” he added. Yahoo CEO Carol Bartz on the other hand believes the partnership with Microsoft will create a “breakthrough search alliance”. Technology analysts though, are not too excited about the deal. In their opinion, both Microsoft and Yahoo are still too far behind Google to make a dent on its position even after working together.
The partnership deal was signed after a failed attempt by Microsoft to buy out all of Yahoo for $47.5bn in 2008. That offer was turned down by the Yahoo board. The two partners now intend to go full steam ahead on implementing the deal in the coming days.
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