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Reports: Microsoft and Yahoo Close Search and Advertising Deal, Will Announce Today

It might all turn out to be anticlimactic. After a tumultuous year of on-again, off-again talks to strike an Internet search and advertising deal, Microsoft (NASDAQ: MSFT) and Yahoo (NASDAQ: YHOO) are about to tie the knot, according to several media outlets. The Wall Street Journal’s All Things Digital blog, citing multiple sources close to the situation, says a deal will be announced within 24 hours. A separate report in Advertising Age says Microsoft’s Bing will become the default search engine on Yahoo, and Microsoft’s AdCenter is expected to be the technology platform for selling online ads.

The specifics of the deal are still speculative at this point. There will probably be no upfront payment made to Yahoo, says Advertising Age, which cites executives with knowledge of the discussions. Instead, the deal is to be structured as a revenue share from the sale of search ads. So, it appears Microsoft will handle the search technology and infrastructure end of things, leaving Yahoo to focus on ad sales, marketing, and media.

All in all, it sounds like the deal is smaller and less dramatic than many outsiders had envisioned. (Yahoo was said to be looking for an upfront payment of hundreds of millions of dollars.) But the partnership—assuming it goes through—will still represent a huge step in the two companies’ struggles against Google in the search and online ads space. Together, Microsoft and Yahoo’s share of the search market is about 30 percent, while Google’s is about 65 percent. Stay tuned…

Gregory T. Huang is the Editor of Xconomy Seattle. You can e-mail him at gthuang@xconomy.com or call 206-624-2249.

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