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Microsoft and Yahoo have reportedly signed a new deal, which will give the pair a third of the search market. Microsoft's Bing search engine will power Yahoo's search, reportedly, while Yahoo will switch to a supporting role, deploying Microsoft's advertising technology.  (Source: Freaking News)
Pair is back together again

Someday there will be a very popular daytime soap opera based on the exploits of Yahoo and Microsoft.  Well, perhaps not, but the pair certainly has offered the tech community a long and drama-filled relationship over the past year and a half that has no real equal.  The on-again-off-again duo has reportedly overcome changes of management (Yahoo), a new search engine (Microsoft), and a fizzled hostile takeover to hook up yet again.

Reuters is reporting that a source close to the discussions has revealed that the pair have signed an advertising deal that will last 24 months.  Reportedly Microsoft won't pay Yahoo anything up front and the relationship will be one of equals, chiefly consisting of revenue sharing.

According to the publication Advertising Age, which was among the first to reveal the news, Yahoo's search will now be powered by Microsoft's newly designed Bing search engine.  Yahoo will shift its focus from search to mutual advertising sales powered by Microsoft's technology.

The deal seems to be one of necessity for both companies.  Microsoft's Bing had been on the rise over the last few months, but its gains were minute compared to the gap between its marketshare and Google's.  Yahoo, meanwhile, has showed no momentum at all, losing more marketshare to Google and Microsoft.

Together the pair will form a much larger, but still lesser search engine.  Last month Google owned 65 percent of U.S. internet searches, according to market researchers Comscore.  Yahoo held 19.6 percent and Microsoft held a mere 8.4 percent -- so the combined Yahoosoft (or Microhoo, perhaps) search hybrid will own approximately 28 percent of the market.

Despite the combined entity holding a lesser position, Google indicated last year that it would challenge any such partnership on antitrust grounds.  The U.S. Justice Department and the EU similarly criticized the companies' talks last year.  States Colin Gillis, an analyst at Brigantine Advisors, "Any agreement where Microsoft powers search and shares the search data to Yahoo is open to scrutiny from US and EU justice departments."

Some speculate that the Justice Department or EU could limit the pair's ability to collect user information due to privacy concerns.  This could sour the young relationship, hampering the pair's ability to compete.  While their young tryst may be ultimately doomed to failure, it appears that Yahoo and Microsoft may be ready to try for a public relationship at last.




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