Microsoft, Yahoo Search Deal Cleared by DOJ, EU

Microsoft and Yahoo's crucial search agreement passed muster with both the U.S. Department of Justice and the European Commission, enabling the rivals to partner and gang up on search engine whale Google.

Microsoft and Yahoo said in a statement they will begin implementing the deal in the coming days, with Yahoo shuttling its algorithmic and paid search platforms to Microsoft. The companies aim to compete this effort in at least the United States by the end of 2010.

"The European Commission has approved under the EU Merger Regulation the proposed acquisition of the Internet search and search advertising businesses of Yahoo Inc. by Microsoft," the EC said in a statement. "The Commission concluded that the concentration would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it."

Microsoft and Yahoo last July 29 struck a deal in which Microsoft's Bing search engine would power Yahoo's search engine for 10 years. Yahoo will take on the exclusive relationship sales force for both companies' premium search advertisers. 

Microsoft agreed to pay Yahoo 88 percent of traffic acquisition costs, or monies paid from search advertising partners, generated on Yahoo's sites during the first five years of the agreement. That figure would increase to 93 percent in the second five years of the pact.

"Although we are just at the beginning of this process, we have reached an exciting milestone," said Microsoft CEO Steve Ballmer. "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."

The companies can count clearing the regulatory hurdles a great success. Google has maintained its search engine market share lead, which is 65.4 percent in the U.S. and slightly higher all over the world.

Bing, which grew share from 8 percent to 11.3 percent since its first full month in June, will combine with Yahoo's share, which has fallen to 17 percent. With their combined 28 percent share, the companies will try to better challenge Google.

The EC noted that Microsoft's and Yahoo's activities in search and search advertising are below 10 percent, with Google grabbing the rest. Scale in search advertising, the EC agreed, is necessary for fair competition. The EC added:

"The Commission's first phase market investigation has shown that not only market participants do not expect the transaction to have any negative effects on competition or on their business but they also expect it to increase competition in Internet search and search advertising by allowing Microsoft to become a stronger competitor to Google."

Meanwhile, Microsoft will provide Yahoo with the same search result listings it makes available to its users of Bing. Yahoo will integrate its content and enhanced listings with info about key topics and tools around the Bing listings.

Yahoo's sales team will exclusively represent and support high volume advertisers, search engine optimization and search engine marketing agencies, resellers and their clients. Microsoft will represent and support self-service advertisers.

The companies hope to transition the bulk of U.S. advertisers and publishers before the 2010 holiday season, but may wait until 2011 if they determine that the transition will be more effective after the holidays.

All global customers and partners are expected to be transitioned by early 2012.