Yahoo, Microsoft link up in challenge to Google (Second Lead)

NEW YORK - Internet search firm Yahoo and software giant Microsoft announced Wednesday a 10-year deal in search and advertising operations in a bid to challenge the online dominance of Google.

Under the terms of the agreement, Yahoo will use Microsoft’s new search engine on its sites and handle some advertising sales for Microsoft.

The two companies - Yahoo in Sunnyvale, California and Microsoft in Redmond, Washington - said in joint announcement that Microsoft would provide the underlying search technology on Yahoo’s popular Web sites.

At the same time, the agreement would give a boost to Microsoft’s revamped search engine, which has been renamed Bing, on which the company’s hopes for challenging Google’s dominance are pinned.

Since its launch a few weeks ago, Bing has been widely praised as a worthy competitor to Google.

“This agreement comes with boatloads of value for Yahoo, our users, and the industry, and I believe it establishes the foundation for a new era of internet innovation and development,” Yahoo Chief Executive Officer Carol Bartz was quoted as saying by the Wall Street Journal.

Google controls some 65 percent of the US internet search market, with Yahoo ranked a distant second with 19.6 percent and Microsoft third with 8.4 percent. Combined, the latter two would hold a 28 percent share of the market.

Microsoft almost bought Yahoo for $47.5 billion last year, but the move was scuttled at the last minute by Yahoo co-founder and chief executive Jerry Yang, who later resigned following widespread criticism.

Microsoft has since refused to revive the buyout offer, but Yang’s successor, Bartz, confirmed in May that the two companies were holding talks on search collaboration.

The 10-year agreement calls for Microsoft to license Yahoo’s search technologies, with Yahoo initially receiving a whopping 88 percent of search-generated ad revenue.

“Through this agreement with Yahoo, we will create more innovation in search, better value for advertisers and real consumer choice in a market currently dominated by a single company,” said Microsoft chief executive Steven A. Ballmer.