For Microsoft, finalizing the Yahoo transition puts Bing in a far more competitive position than ever before. With close to 30% of the search market, Bing is now a force to be reckoned with.

Even if you don't regularly use Microsoft's search engine, Bing's history of continuously improving the search experience for its users (especially by giving users access to the information they are looking for with fewer clicks) is keeping Google on its toes and driving it to improve its search products as well.

First of all, it's important to note that while Yahoo will incorporate Bing's search results, the company has no plans to scrap any of the auxiliary search products that currently surround Yahoo's search results. This means that Yahoo will continue to show results from it's own news product on its search results pages, for example. Yahoo's Search Pad and Search Scan apps that allow users to filter searches will also remain on the search results pages.

According to Yahoo's own announcement, this deal also means that the company can now focus on providing even more additional services around search, without having to focus on maintaining its own search engine.

Nothing New for Yahoo

For Yahoo, using somebody else's search technology isn't really anything new. Before launching its own search product, Yahoo had a partnership with Google that lasted from 2002 to 2004.

Overall, Bing offers better search results than Yahoo's own search engine. Besides better search results, Yahoo's users probably won't notice any major differences once Yahoo begins to use Bing. According to Yahoo's statement, this implementation will begin in the next few days, though the exact date for the transition isn't clear yet.

More Competition for Google

Bing, which is already growing at a steady clip will not become and even more important rival for Google's search engine. While anybody would be hard-pressed to argue that Google isn't innovating fast enough, this renewed competition from Bing will surely put some pressure on Google to innovate even faster.

In addition, this deal also makes Microsoft and bigger player in the search engine advertising business, a field that Google can currently dominate because of the sheer size of its market share.

And What About Developers?

Yahoo also just posted some information about what it plans to do with its developer tools now that this deal has been cleared. The overall message in Yahoo's announcement to developers, though, is that the company doesn't really know what it will do yet.

For BOSS, Yahoo and Microsoft are considering a fee-based structure, the future of SearchMonkey is unclear ("we're working hard to determine which path provides the best value for site owners and end users") and with regards to Yahoo's Site Explorer, Yahoo is also still considering its options.

Click here to read the full text of the joint Microsoft/Yahoo press release.

Press Release

SUNNYVALE, Calif. & REDMOND, Wash.--(BUSINESS WIRE)--Microsoft (Nasdaq:MSFT - News) and Yahoo! (Nasdaq:YHOO - News) announced today that they have received clearance for their search agreement, without restrictions, from both the U.S. Department of Justice and the European Commission, and will now turn their attention to beginning the process of implementing the deal.

Implementation of the deal is expected to begin in the coming days and will involve transitioning Yahoo!'s algorithmic and paid search platforms to Microsoft, with Yahoo! becoming the exclusive relationship sales force for both companies' premium search advertisers globally. Once the transition is completed, the companies' unified search marketplace will deliver improved innovation for consumers, better volume and efficiency for advertisers and better monetization opportunities for web publishers through a platform that contains a larger pool of search queries.

"This breakthrough search alliance means Yahoo! can focus even more on our own innovative search experience," said Yahoo! Chief Executive Officer Carol Bartz. "Yahoo! gets to do what we do best: combine our science and technology with compelling content to build personally relevant online experiences for our users and customers."

Microsoft CEO Steve Ballmer concurred with Bartz's assessment. "Although we are just at the beginning of this process, we have reached an exciting milestone," Ballmer said. "I believe that together, Microsoft and Yahoo! will promote more choice, better value and greater innovation to our customers as well as to advertisers and publishers."

Consumer Search Experience

Under terms of the agreement, which was announced in late July 2009, Microsoft will provide Yahoo! with the same search result listings available through Bing, and Yahoo! will innovate around those listings by integrating rich Yahoo! content, enhanced listings with conveniently organized information about key topics, and tools to tailor the experience for Yahoo! users.

Yahoo! will focus on providing a compelling and innovative search experience that allows people to find and explore the things, people and sites that matter most to them. While Microsoft will provide the underlying platform, both companies will continue to create different, compelling and evolving experiences, competing for audience, engagement and clicks.

Transition Timeline

Yahoo! and Microsoft will work with advertisers, publishers and developers on a customized plan designed to make the transition as efficient and seamless as possible. Both companies will begin working closely with most partners well in advance of their planned transition to the Microsoft platform and will communicate important information to partners about the transition periodically via phone, email, webinars and a newly created website at www.searchalliance.com.

The companies will begin the transition of algorithmic search and have set a goal of completing that effort in at least the United States by the end of 2010. The companies also hope to make significant progress transitioning U.S. advertisers and publishers prior to the 2010 holiday season, but may wait until 2011 if they determine that the transition will be more effective after the holiday season. All global customers and partners are expected to be transitioned by early 2012.

Customer Relationships

Once the transition is in place, Yahoo! and Microsoft will each represent and provide customer support to different advertiser segments. Yahoo!'s sales team will exclusively represent and support high volume advertisers, SEO and SEM agencies, and resellers and their clients. Microsoft will represent and support self-service advertisers.

Regulatory Summary

Although the transaction previously was cleared by regulators in Australia, Brazil and Canada, the terms of the agreement required clearance by U.S. and European regulators before it could commence. Meanwhile, Microsoft and Yahoo! continue to work with regulators in Korea, Taiwan, and Japan to ensure that they have all relevant information necessary to evaluate the transaction before the deal commences in those specific jurisdictions.

About Microsoft

Founded in 1975, Microsoft (Nasdaq:MSFT - News) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

Note to editors: If you are interested in viewing additional information on Microsoft, please visit the Microsoft Web page at http://www.microsoft.com/presspass on Microsoft's corporate information pages. Web links, telephone numbers and titles were correct at time of publication, but may since have changed. For additional assistance, journalists and analysts may contact Microsoft's Rapid Response Team or other appropriate contacts listed at http://www.microsoft.com/presspass/contactpr.mspx.

Yahoo Search continues its steady decline. Yahoo Search lost another 1% market share last month and has now lost a total of 5% since September 2008 when it still owned 18.8% of the market according to Compete. The total search volume on Yahoo was down 8% and Yahoo served 100 million less queries in September than August.

Google, Ask and AOL Hold Steady

Google's market share grew slightly from 72.3% to 72.6%, while Ask and AOL remained stable. Based on this data, Bing seems to be eating into Yahoo's market share, but isn't growing at Google's expense.

Searches Per Day

Compete's Marko Madjarac points out that Bing's numbers are even more impressive when we take into account that Bing's users tend to perform fewer searches on the service (5 searches per user per day) than Google's users (5.6 searches). Bing apparently lives up to its promise to get users to relevant answers faster than any other search engine. Yahoo users performed an average of 7.8 searches per day.

Yahoo Mail has been improved with the idea of making it focus more on the social connections that are already implicit in users' email exchanges. The Yahoo Mail homepage will now display status updates from a user's friends on the service. If a contact uploads new images to Flickr, for example, these updates will appear on the Yahoo Mail homepage (and also in Yahoo Messenger).

Yahoo also now allows users to attach up to 25MB of photos to messages and has improved its tools to attach and view these images. To make sharing photos easier, Yahoo has integrated Xoopit's 'MyPhotos' application into Yahoo Mail. Yahoo acquired Xoopit last month. In addition, Yahoo will also integrate Evite into Yahoo Mail, which makes it easier to create invitations based on a user's address book. 

In addition, Yahoo has also updated its mobile, web-based version of Yahoo Mail. The site is now a lot cleaner and allows users to read Word, Excel, and PowerPoint attachments right from within the web application.

Some of these updates are quite reminiscent of what Microsoft is doing with its Live products. On Windows Live, for example, users can also aggregate their updates from other services and see what their friends are doing online. While Yahoo is integrating all these services into Yahoo Mail, Microsoft Live splits all these tools up into separate applications.

Despite Bing Deal, Yahoo Redesigns Search

Interestingly, Yahoo also decided to preview an updated look and feel of Yahoo Search. The new look will feature a three-column layout, similar to the Yahoo homepage. While most of Yahoo's own search engine technology will obviously soon disappear in favor of Microsoft Bing, Yahoo wants to align the layout of its search engine with the rest of its services. The new layout brings services like Search Monkey and data filters into a column on the left side. None of these are new services, though they do bring old services that were often underutilized to the foreground.

People Search

Yahoo will also give its users a better way to search for people. Once these updates go live, whenever somebody uses Yahoo Search to find information about a person, Yahoo will display data from LinkedIn, Twitter, FriendFeed, and Facebook.

Nice, But What About Bing?

All of these updates are quite nice, though once Yahoo switches over to Bing, it will remain to be seen how many of Yahoo's search tools will actually survive the transition. During today's presentation, Larry Cornett, Yahoo's VP of Search Products and Design, stressed that the company will continue to invest in search technologies. During the Q&A session after today's presentation, Yahoo also focused on the fact that it will continue to control how search results are displayed, even if those results come from Bing. Yahoo will also continue to be able to add on to Bing's results, which sounds as if programs like Search Monkey could survive the transition.

Yahoo Messenger

Yahoo also announced updates to Yahoo Messenger. The new beta of Messenger 10 will launch in 25 countries and will feature support for status updates, similar to Yahoo Mail. None of these updates are extremely exciting, though it is important to remember that Yahoo Messenger has a lot of users, both in the US and worldwide. Many of these users will surely appreciate these updates, which, among others, include support for high-quality video calls.

At its core, this agreement means that Yahoo has given up on its search engine business. Microsoft will be able to increase its market share in the search engine and search advertising market. Yahoo will receive revenue from Bing searches generated on Yahoo's sites and become "the exclusive worldwide relationship sales force for both companies' premium search advertisers." What remains to be seen, though, is what will happen to Yahoo's investments in interesting search technologies like BOSS and Search Monkey. Integrating these technologies, which are tied to Yahoo's search engine, could prove rather difficult for Microsoft. We will also have to wait and see what's going to happen to Yahoo's search APIs.

If anything, the Yahoo Search team will probably not be too happy to hear Yahoo suggest on its blog that Yahoo used to offer a "great" search experience but that Bing will offer an "awesome" one. In a call earlier this morning, Yahoo CEO Carol Bartz announced that some employees from the Yahoo search team will move to Microsoft, while others will move to the display business.

Creating Competition for Google

As we pointed out before, we think Bing is a worthy competitor to Google's search engine, which both Microsoft and Yahoo try not to mention in all their press materials but whose shadow obviously looms large over this deal. Advertisers aren't likely to spend a lot of money on a search engine that only commands less than 10% of the market, but once combined with Yahoo Search, Bing could easily reach 20% or more. At this point, advertising on Bing becomes far more interesting.

In a taped video statement Microsoft's CEO Steve Ballmer argues that the agreement will bring choice back to consumers (a Silverlight version is embedded below, a WMV version is available for download here). We can't help but note that consumers always had lots of choices with regards to search engines - in the past, most just didn't make the choice Ballmer would have preferred.

It's important to note, though, that neither Microsoft nor Yahoo seem to have worked out all the details of this deal, and that users won't see any changes before early 2010. The companies expect the agreement to be reviewed by industry and government regulators before this.

The Details

Here are the details of the search/ad pact between the two companies, according to this morning's press release:

• The term of the agreement is 10 years;
• Microsoft will acquire an exclusive 10 year license to Yahoo!'s core search technologies, and Microsoft will have the ability to integrate Yahoo! search technologies into its existing web search platforms;
• Microsoft's Bing will be the exclusive algorithmic search and paid search platform for Yahoo! sites. Yahoo! will continue to use its technology and data in other areas of its business such as enhancing display advertising technology.
• Yahoo! will become the exclusive worldwide relationship sales force for both companies' premium search advertisers. Self-serve advertising for both companies will be fulfilled by Microsoft's AdCenter platform, and prices for all search ads will continue to be set by AdCenter's automated auction process.
• Each company will maintain its own separate display advertising business and sales force.
• Yahoo! will innovate and "own" the user experience on Yahoo! properties, including the user experience for search, even though it will be powered by Microsoft technology.
• Microsoft will compensate Yahoo! through a revenue sharing agreement on traffic generated on Yahoo!'s network of both owned and operated (O&O) and affiliate sites.
• Microsoft will pay traffic acquisition costs (TAC) to Yahoo! at an initial rate of 88% of search revenue generated on Yahoo!'s O&O sites during the first 5 years of the agreement.
• Yahoo! will continue to syndicate its existing search affiliate partnerships.
• Microsoft will guarantee Yahoo!'s O&O revenue per search (RPS) in each country for the first 18 months following initial implementation in that country.
• At full implementation (expected to occur within 24 months following regulatory approval), Yahoo! estimates, based on current levels of revenue and current operating expenses, that this agreement will provide a benefit to annual GAAP operating income of approximately $500 million and capital expenditure savings of approximately $200 million. Yahoo! also estimates that this agreement will provide a benefit to annual operating cash flow of approximately $275 million.
• The agreement protects consumer privacy by limiting the data shared between the companies to the minimum necessary to operate and improve the combined search platform, and restricts the use of search data shared between the companies. The agreement maintains the industry-leading privacy practices that each company follows today.

$3 Billion?

Kara Swisher reports that on the financial side of things, it looks like the latest deal would include Microsoft paying several billion dollars to Yahoo upfront to take over its search advertising business. If this deal goes through, Swisher reports, Yahoo would also take over Microsoft's display ads business. Concrete numbers are still hard to come by, but 27/7 Wall Street reports that Yahoo would get $3 billion upfront and "will get 11% of the revenue that its searches provide after traffic acquisition costs in each of the first two years. In the third year, that figure would go to 90%."

As always, we will keep a close eye on this story as it unfolds. For now, there are still rumors, but they seem to be quite substantial, and a deal between Microsoft and Yahoo (though not a merger of the two companies) would definitely make sense at this point.

Some of this new interest in Microsoft's search engine was definitely driven by curiosity, but unlike other (failed) entries into the search engine market like Cuil, Bing actually delivers as a search engine, which should help Microsoft to retain a good chunk of these users. Of course, Microsoft's $80 million advertising blitz is definitely helping Bing as well, and based on our own experience, it is clear that Bing's marketing and PR campaign is reaching a lot of non-geeks and late adopters who would not typically go out of their way to try a new search engine.

We have to say, though, that our own stats don't corroborate StatCounter's findings. In our own analytics, Bing is barely visible, with Yahoo bringing us at least three times as many visitors. We are, however, not surprised to hear that a lot of users are checking Bing out right now.

Source: StatCounter Global Stats - Search Engine Market Share

Does Microsoft Still Need Yahoo Search?

If these stats hold up over the next few weeks, it will be interesting to see if we will still hear any chatter about Microsoft acquiring Yahoo's search assets in order to become a bigger player in the search engine market. Today, a combined Yahoo and Microsoft search engine could control almost 25% of the market. In an interview with PC Magazine this morning, Yahoo's CEO, Carol Bartz, argued that Yahoo was not under any pressure to make a deal with Microsoft, and that she thinks that any lift that Microsoft is seeing in the search market right now would only be temporary.

The new Yahoo! interface includes more recommended search queries for related images than Google, a next-image picking slideshow on each image's page, and an easy direct link to the image itself. Unfortunately, there is not a filter by copyright conditions, which is a major shortcoming.

Google's interface does not make it as easy to scan through multiple images as quickly, but both could use meaningful support for limiting searches to Creative Commons or public domain images. The new Yahoo! Image Search option of limiting to within or outside of Flickr isn't really useful at all.

None the less, we're impressed with this small change from the search giant and we expect that for casual image searching, Yahoo may now be the engine of choice for more people.

Google, of course, also shows thumbnails for YouTube clips in its search results, but clicking on these will take you to YouTube and won't open the video player right on the page.

Yahoo says that it wants to make it easier for developers to make use of SearchMonkey. SearchMonkey is an extremely powerful tool, but it can also be very hard to use for somebody who doesn't have the technical knowledge required to create a SearchMonkey app. Thanks to this new feature, even novice webmasters will now be able to embed some of the most popular forms of content on Yahoo's search results page.

As we have said before, Yahoo continues to develop new and innovative ways to enhance its search, but so far, this hasn't made too much of a dent in Google's market share. Breaking Google's momentum will be very hard for any player in the search engine market, but if anything, Yahoo is clearly showing that it is not willing to throw in the towel just yet.

After that, whenever a Facebook profile appears in your search results, it will include this person's public profile picture, as well as an additional line with the basic Facebook commands (add friend, poke, send message, view friends). According to Yahoo, Facebook shared this structured data with the SearchMonkey app by adding semantic markup to its public profile pages.

Maybe more importantly, though, features like this show that there is still a lot of life left in Yahoo Search. As Marshall Kirkpatrick noted a few weeks ago, things may not be looking too rosy for Yahoo in business terms, but the company is at least trying out a lot of cool search-related technologies.

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Web Trends

The Next Node on the Net: Your Car!

A new radio system developed in Australia is transforming the vehicles on the street into nodes on a network. The technology, designed by scientists at the University of Southern Australia's Institute for Telecommunications Research, is an application called "Dedicated Short Range Communications" (DSRC). Using a combination of GPS and Wi-Fi, cars can communicate their location data to a central office, but it also enables them to communicate with each other.

Social Network Downtime in 2008: LinkedIn Up - Twitter Down

According to a new report (PDF) from uptime monitoring service Pingdom, Facebook and MySpace, the two largest players in the social networking market, had very little downtime in 2008. Twitter, whose iconic Fail Whale adorned the service far too often at the beginning of the year, got its act together and was only down for 12 minutes in December. LinkedIn, on the other hand, saw an increased rate of outages in the course of the year.

How to Reach Baby Boomers with Social Media

A new report from Forrester Research revealed some surprising information: apparently Baby Boomers aren't exactly the technology Luddites that people think they are. In fact, more than 60 percent of those in this generational group actively consume socially created content like blogs, videos, podcasts, and forums. What's more, the percentage of those participating is on the rise.

Vint Cerf: Despite Its Age, The Internet is Still Filled with Problems

Vint Cerf, Vice President and Chief Internet Evangelist for Google and widely recognized as one of the "Fathers of the Internet", said that the issues facing the Internet today are as complex as they were pre-Internet. Speaking at the SMX Conference in Santa Clara, Cerf discussed his concerns about the current state of the Internet and gave us a glimpse into his hopes for its future.

Black Out Your Twitter Photo: NZ Copyright Law Protest Goes Viral

Social networks are making it increasingly easy to organize and propagate protests. One that caught our eye this week was the New Zealand Internet Blackout, which is using a variety of Internet services to protest against a new law in New Zealand - the Guilt Upon Accusation law 'Section 92A'. This law may have major implications for Internet users in NZ, because it calls for internet disconnection "based on accusations of copyright infringement without a trial and without any evidence held up to court scrutiny." This law is due to come into effect in New Zealand on February 28th. The Blackout is in force on Twitter, Facebook, MySpace, Bebo and various websites/blogs.

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A Word from Our Sponsors

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Jobwire

Who's Hiring in Tech? 2009 Numbers So Far

It may be dismal economic times, but some companies are continuing to make new hires in tech and new media. That's what we track on our Jobwire site and below you'll find aggregate hiring numbers for the first 6 weeks of the new year. We last covered aggregate stats in the middle of December and the new numbers are similar to what we saw then. IT and software companies are hiring more than anyone else, but marketing firms are now hiring more than publishing and social media companies, a switch since our last report.

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Web Products

Mobile News: Yahoo Mobile, Skype on Cell Phones, Second Android Phone, and More

This week, the mobile computing world revolved around the Mobile World Congress in Barcelona. Among some of the highlights were the announcement of the second Android phone, as well as Yahoo's new mobile initiative, and the announcement of a partnership between Nokia and Skype that will bring Skype's VOIP client to Nokia's high-end N97 phone.

Would You Pay $200 for an Android App? Android Market Preps Priced Applications

The Android Market was designed to be the one-stop shop for all G-1 users to download applications for their mobile handsets. As such, it had a great deal in common with the Apple iTunes App Store - save for one specific feature: the ability for developers to charge for their apps. Now, even that feature will be common between the two application stores as the Android Market prepares to release support for priced applications.

Yahoo! Search Turns 5, Has Tech to Show For It

It was 5 years ago today that Yahoo! stopped using Google to power its searches and started using its own search technology, the company wrote today in a blog post. Everyone knows that things aren't looking good for Yahoo! in business terms, and the company's search and advertising market shares look even worse. But you know what deserves some celebration on this 5th birthday? The search team's work on some really cool search related technologies.

Yahoo! Search Monkey, BOSS (Build Your Own Search Service) and Delicious are three big wins for the Yahoo! search team - even if no one has yet figured out how to turn them into money. That's not the only reason why we're all here on the web is it? Isn't it largely for love of innovation? Yahoo! in general, including the search team, deserve applause for their embrace of innovation.

Facebook Launches Facebook Bill of Rights, Reverts to Previous Terms of Use

If you read any tech publication this week, you couldn't have helped but encounter the brouhaha over Facebook's revised Terms of Use. Now, Facebook has decided to return to its previous Terms - dated September 23, 2008 - until it can better determine how to proceed. To help ensure they don't make the same mistakes again, they've also started the "Facebook Bill of Rights," a Facebook group formed specifically to allow people "to give input and suggestions on Facebook's Terms of Use."

ATG Recommendations Aims to Predict Your Next Purchase

In this latest instalment in our series on recommendation engines, we looked at ATG - an e-commerce services vendor which, among other things, provides recommendations technology to retailers such as Tommy Hilfiger and BetterWorldBooks. ATG has a similar "blended" approach to recommendations as richrelevance, whom we profiled last week - in other words it uses a mix of personalization and wisdom of the crowds. ATG's current approach to recommendations is heavily influenced by a product it acquired in January 2008, CleverSet. We spoke to ATG this week, to find out more about their recommendations product and what makes it stand out in (what we're discovering) is a crowded market for recommendation technologies.

See other posts in ReadWriteWeb's special series on Recommendation Engines

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Enterprise

Don't Forget About Security on the PC

Security in the cloud is a hot topic. But when we interviewed Peter Bell, General Partner at Highland Capital Partners, he went out of his way to emphasize the need for security on the PC. He was "sticking to the script," as Highland has a number of investments in this area, which we'll review. Nevertheless, his basic point is valid. There is little point for the data centers that serve your SaaS applications to have excellent security if your PC leaks like a sieve. To all Mac-heads, good choice, but most people still use PCs!

Email us if you're interested in writing for ReadWriteWeb's Enterprise Channel.

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That's a wrap for another week! Enjoy your weekend everyone.