Antitrust regulators from the United States and Europe approved Microsoft's proposed Internet search deal with Yahoo!, removing the final hurdle facing the creation of a new number-two player in the market. Under terms of the deal, Microsoft's Bing search engine will be used to power searches from Yahoo!'s still-popular network of websites.
"Although we are just at the beginning of this process, we have reached an exciting milestone," Microsoft CEO Steve Ballmer said. "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."
If the deal were to go into effect immediately, Microsoft's share of the search market in the United States would jump from its current 11.3 percent, good for a distant third place, to 28.3 percent, a second-place finish. Market leader Google would continue to dominate with 65.4 percent of all search queries in the United States. (Google's lead worldwide and in many international markets is often quite a bit bigger.)
But there's a big difference between the two scenarios. Whereas today Microsoft accounts for just one-sixth of Google's searches, when combined with Yahoo!, it will account for almost half. That creates a credible second alternative for advertisers, and if Microsoft can continue its preferable pricing strategies, it could reap some important financial benefits down the road as well. (Yahoo! will benefit more immediately; under terms of the deal, Yahoo! keeps the majority of ad revenues generated on its own sites.) For now, Microsoft is comfortable with simply grabbing some significant market share and getting its Bing search engine established as a solid alternative to Google.
Microsoft says it expects to roll out Bing-powered Yahoo! search results by the end of 2010, though it could push things back a bit if the companies find that the transition will impact their holiday 2010 sales season. All of Yahoo!'s international properties should make the transition by early 2012, the companies say.