It's now official: Microsoft (MSFT) and Yahoo! (YHOO) are in cahoots to take on search engine giant Google (GOOG). The new search partnership inked by the two companies still needs to secure regulatory approval, but the talks that began in late July are merely a step away from reality now.
Microsoft and Yahoo! expect to pass this final step early next year. If this happens, the muscle behind Yahoo! search will be Microsoft's Bing search engine.
Together, this combined entity will account for 28% of the Internet searches conducted in the United States, according to comScore, while Google has 65% of the domestic market. Worldwide, the gap is even wider. Google owns 67% of the global search market, and Microsoft and Yahoo! handle only 11% of Internet searches.
While Bing will do the heavy lifting for Yahoo! under the deal, the latter will keep 88% of the revenue from ads run along with the searches. And, Yahoo! will be able to sell ads on some of the sites Microsoft owns. The deal is expected to pump up Yahoo!'s operating profit by $500 million and save $200 million in capital expenditures, since it won't have to invest as much in its own search tool.
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