Microsoft/Yahoo! Deal Imminent

According to multiple sources close to the companies, Microsoft and Yahoo! will soon announce an Internet-search partnership aimed at ending Google's stranglehold on the market. The agreement, which could be finalized and announced as early as today, will see Yahoo! offering Microsoft's Bing search service on its sites.

If it happens as expected, the Microsoft/Yahoo! deal will create an alliance that alters the search market landscape in measurable if not momentous ways. Today, Google dominates Internet search, with 65 percent usage share in the United States and even higher numbers worldwide. Yahoo! currently accounts for about 20 percent of US searches, and Microsoft accounts for over 8 percent. The alliance would create a new number-two player with about 30 percent of the market.

That number is still less than 50 percent of Google's share, but it provides a single alternative for advertisers to rally around. And that's really the point of this alliance: Microsoft and Yahoo! will enter into an advertising revenue-sharing agreement that would benefit from the scale of the two companies' online properties.

Of course, Google is still an entrenched and dominant player, and it's not clear that even the combined forces of Microsoft and Yahoo! will dramatically alter Google's fortunes. And any potential Microsoft/Yahoo! alliance is sure to be scrutinized for antitrust implications on both sides of the Atlantic.

Microsoft's Bing search engine, meanwhile, continues to garner positive reviews and gain users. The recent release of that service, combined with what might appear to be overwhelmingly beneficial financial terms for Yahoo!, likely played a role in making this deal happen.

I suspect I'll be writing more about this deal in the days ahead. Stay tuned.

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