The rumours of Microsoft and Yahoo getting back in the sack are on the brink of becoming facts, as AdAge has sources expecting an announcement this week about a tie-up where Yahoo makes Bing its search provider.
What this means is that Being would be handling the search responsibilities for Yahoo – like the latter previously had a ‘Powered by Altavista/Google’ under its search box – and grab a share of the ad revenues out of the deal.
The entire ad-share negotiations are the critical part of the talks right now. Yahoo had asked for an upfront cash payment last week, which stalled the negotiations; but all signs indicate that this is off the table for now.
The deal would see Bing consolidate around 30% of the search marketplace, which Steve Ballmer thinks is enough to dent Google’s dominance. Ballmer is quite serious about search, stating previously that MS is willing to spend around $10 billion a year on it.
"There is no way [Yahoo] can compete with that," said Tim Cadogan, CEO of ad-serving firm OpenX and former senior-VP of global advertising for Yahoo. "As Bing grows, the first place Bing takes share from is not Google but the other guys. So Yahoo is going to lose share unless they have something radical planned.”
Yahoo CEO Carol Bartz has alternately played down search as a major component of Yahoo's business and pledged to drive a hard bargain in any potential deal with Microsoft.
"It has to be a deal that we trust and a deal we could get the right information and a deal where we make money," she said at a recent analyst conference. "Because, as I say to Steve, this is like me trying to buy Office – this is not a minor little issue."
For the user, though, all it means is that the great Yahoo interface might soon have a search engine to match. Win-win!