Microsoft, Yahoo Finish Paid Search Transition in U.S., Canada

Microsoft has finished migrating all of Yahoo's ad accounts to its adCenter platform in the U.S. and Canada. The companies hope this effort helps Bing compete with Google.

For two months, Microsoft Bing has been serving all of Yahoo's searches in the United States and Canada. Now all of the paid search Yahoo generates in those countries is funneling through Microsoft's ad platform, too.

Microsoft and Yahoo Oct. 27 said they finished migrating all of Yahoo's ad accounts to Microsoft's adCenter advertising platform in the United States and Canada, the next step in the companies' 10-year pact to have Microsoft fuel Yahoo's search engine.

The companies claim the deal will give much-needed revenue to Yahoo and search market share to Bing, which is facing an uphill battle versus Google.

With Yahoo and Bing, Microsoft commands about 28 percent of the U.S. search market, less than half of Google's 65 percent share.

Microsoft said in a statement the search alliance with Yahoo, which comes more than two years after Google was denied the same opportunity with Yahoo, will help advertisers reach 163 million searchers in the United States and 15 million searchers in Canada via Bing and Yahoo.

"This will provide advertisers with the benefit of a combined marketplace through a single platform, creating a competitive alternative in search," said David Pann, general manager of Microsoft's Advertising Search Network.

Pann cautioned that as the adCenter marketplace begins to handle more volume, the supply and demand will drive higher costs per click (CPCs) following the transition.

He expects prices to stabilize within weeks once advertisers experiment with bidding to see what works for their campaigns.

Caris and Company analyst Sandeep Aggarwal called the paid search migration
a significant milestone in making Microsoft/Yahoo the No. 2 search player.

The pact should provide market share stabilization, op-ex savings and revenue per search for Yahoo, with Microsoft gaining "much needed minimum scale to be relevant and meaningful in search and more innovation and differentiation to expand its share."

Microsoft and Yahoo's work is not done. Over the next few days, Yahoo Mobile search ads will be transitioned to the Microsoft adCenter.

Beginning early next year, Yahoo and Microsoft will start shuttling Yahoo search and search ads to Microsoft in international markets, an effort the companies hope to complete in early 2012. 

The partners will start transitioning organic search in Latin America markets in the first quarter in 2011, followed by U.K., France, Ireland and India in the second quarter of 2011.