Microsoft and Yahoo have reached agreement on an online search and advertising deal.
The companies announced today that the Microsoft Bing search engine will power Yahoo's search site, and Yahoo will sell premium search advertising services for both companies.
As we've previously reported, the Microsoft/Yahoo deal involves Yahoo agreeing to use Microsoft's Bing search engine on its websites, with Yahoo handling the sale of text ads that appear alongside the search results for its own sites and some of Microsoft's.
Having initially tried to acquire Yahoo, Microsoft has more recently focused on trying to purchase Yahoo's search and search advertising businesses. The new deal appears much less ambitious and involves no up-front payment to Yahoo. Instead the companies will share revenue.
It remains to be seen whether regulators will approve the effective merging of two of the major players in the search-advertising space. Microsoft and Yahoo believe that by combining they can offer more effective opposition to Google, which dominates online search.
The possibility that Yahoo might be open to a partnership emerged last year while Microsoft was in the midst of trying to acquire the company.
Since then it has tried to acquire Yahoo's search business at least twice. In June it offered to pay $1 billion for the search assets and to invest another $8 billion in Yahoo at $35 per share.
The deal comes about two months after Microsoft revamped its search engine and relaunched it as Bing, which has already been taking share from Yahoo's search engine and has gotten early positive user reviews, according to analysts' statistics. For its part, Yahoo has a larger network of advertisers than Microsoft, and Microsoft will benefit now by having access to them.