Yahoo, Microsoft announce search pact to challenge Google

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New York—Yahoo and Microsoft Corp. announced Wednesday a partnership in which Yahoo will use Microsoft's Bing as its default search engine, significantly closing the gap in search usage with market leader Google.

The proposed 10-year deal, if approved by federal regulators, is expected to expand Yahoo and Bing's search market share to almost 30%, compared with Google's 65%, according to comScore.

While Yahoo will be dropping the search side of its business, it is expected to take over the sale of pay-per-click search ads for both companies, and be able to access a larger search database with which to target viewers of its market-leading display ad business. Yahoo will keep 88% of the revenue on ads that appear on Yahoo sites.

For Microsoft, the deal affords instant credibility for its Bing search engine, which debuted in June but has not been able to gain significantly on Yahoo's search market share of about 20%.

According to a joint Yahoo-Microsoft Web site, the companies expect to implement the deal two years after regulatory approval. Self-serve and search advertising will be built on Microsoft's adCenter platform. Yahoo will continue its search affiliate partnerships.

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