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Microsoft Bings Yahoo

By Neetal Parekh on July 31, 2009 7:02 AM

After over a year of negotiations, Microsoft and Yahoo are officially hitched--sort of.

The ten-year partnership deal links the two mega-sites in web search.  Yahoo's interface will remain the same but its search will be powered by Microsoft's recently-ramped up search engine, Bing.  Though Google is the search engine of choice for over 70% of all internet searches, the deal unifies the #2 and #3 in the search line.

The deal guarantees Yahoo an 88% profit for all searches conducted on Yahoo/Bing over the next five years.  This may allow the website to stay afloat, retool, and refocus as it shifts its attention from power search to building out its other portal features.  Yahoo expects the partnership to add about $275 million to annual operating cash flow.

This comes after Microsoft offered over $45 billion to acquire Yahoo in early 2008.  Analysts wonder if Yahoo got the short end of the digital stick this time around.  Beyond the 88% of initial search revenue, compared to the 100% it received when it was on its own, there is not much else chalked out for Yahoo in this deal. 

However, Yahoo will get to keep its identity and its company.  It may be that it is 'buying' time and resources to redefine and resituate itself in the changing and social media-focused world of Web 2.0. 

Yahoo shareholders are not so sure...the company's stock fell 12% yesterday after news of the deal was made public. 

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