The world’s biggest software firm and web portal team up to challenge Google

USERS will probably not notice the difference. But the deal between Microsoft and Yahoo!, the world’s biggest software firm and the leading web portal, for a ten-year partnership in searches and advertising on the internet, may one day be seen as a momentous event. The combination, which was announced on July 29th after years of speculation about a tie-up, is not as far-reaching as originally envisaged. But it is likely to create a serious rival to Google, the online giant that dominates both of these activities.

The agreement is supposed to help both parties overcome their most pressing problems. Microsoft will significantly increase the use of its search service, called Bing, and its platform to place online advertisements, because Yahoo! will use both of them on its websites. The web portal, for its part, will be able to cut costs and increase revenues. Yahoo! will no longer have to invest millions in its search and advertising technology, both of which it will hand over to Microsoft. It will also get more money for the ads placed next to its search results. Carol Bartz, Yahoo!’s chief executive, said that the tie-up “comes with boatloads of value” for her firm. During the first five years of the deal, it will receive 88% of the revenue generated by ads next to search results on its web page. …