EU/US approval for Microsoft/Yahoo! alliance

19 Feb 2010

Both the European Commission and the US authorities have approved Microsoft’s plans to buy the internet search and search advertising businesses of Yahoo!

The commission concluded that the deal “would not significantly impede competition in the European Economic Area (EEA)”.

It noted that in the EEA, Microsoft’s and Yahoo!’s activities in internet search and online search advertising are “very limited”, with combined market shares generally below 10pc. Google, by contrast, generally enjoys market shares above 90pc.

Stronger Google competitor
The commission examined the potential impact of the merger on internet search users, advertisers, online publishers and distributors of search technology.

It said its investigation showed that not only do market participants not expect the alliance to have any negative effects on competition or on their businesses, they also expect it to increase competition in internet search and search advertising by allowing Microsoft to become a stronger competitor to Google.

The US Department of Justice also gave its approval to the Microsoft/Yahoo! tie-up today.

Particulars of the deal
Under the deal, Microsoft will acquire a 10-year exclusive license to Yahoo!’s search technologies. The tech giant will also hire Yahoo!’s internet search and search advertising staff. Microsoft will also become the exclusive internet search and search advertising provider used by Yahoo!.

In return, Microsoft will retain 12pc of the search revenues generated on Yahoo!’s and its partners’ websites during the first five years of the agreement, paying 88pc to Yahoo! as a traffic acquisition cost.

An exciting milestone
Microsoft CEO Steve Ballmer described the alliance between the two companies as “an exciting milestone”.

“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,” he said.

“This breakthrough search alliance means Yahoo! can focus even more on our own innovative search experience,” said Yahoo! CEO Carol Bartz.

Implementation of the deal is expected to begin in the coming days and will involve the transfer of Yahoo!’s algorithmic and paid search platforms to Microsoft.

Photo: Microsoft CEO Steve Ballmer

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