Microsoft Corp’s assault on search engine leader Google Inc took a major step forward on Thursday as US and European regulators cleared the software firm’s search partnership with Yahoo Inc.
The 10-year deal, struck last July, is the biggest effort by Microsoft to establish an online business to rival Google — an area where Microsoft has lost US$5 billion over the last four years.
“Microsoft really has room to throw money at this,” said Kim Caughey, senior analyst at Fort Pitt Capital Group. “I think it can work. If they can make inroads in specific target areas, they could have something positive to report.”
Microsoft has already made some progress with its search engine, Bing, picking up 3.3 points of market share since its launch last June.
But Bing is not likely to “push Google off a very big pedestal any time soon,” Caughey said.
“In terms of our modeling, we really don’t see any impact from Microsoft-Yahoo on our Google numbers,” said Clayton Moran, an analyst at The Benchmark Co.
“It doesn’t change much in terms of the competitive dynamics of the industry right away,” he said. “From a Google perspective, looking out over the next couple of years, it’s a nonevent.”
The deal, cleared unconditionally by the US Department of Justice and the European Commission on Thursday, is not expected to affect Microsoft’s bottom line, but could lay the foundation of a profitable online business.
The Department of Justice’s antitrust division said the deal was unlikely to substantially lessen competition.
US market participants had expressed support for the partnership as a way to create a more viable alternative to Google, the division said in a statement issued late on Thursday.
Google, which did not oppose the partnership, did not comment specifically on the regulatory approval, but said that there has always been “robust” competition in the search ad business. Its shares rose 1.1 percent.
The deal means Bing becomes the search engine for Microsoft and Yahoo sites, while Yahoo focuses on attracting big advertisers.
Microsoft will handle the automated auction of search ads for use on both companies’ sites and pay Yahoo a portion of search ad sales generated on Yahoo pages.
Last month Yahoo handled 17 percent of US Internet searches, while Microsoft took 11.3 percent, comScore said.
Globally, Google is even more dominant, with 90 percent of the search market compared with 7.4 percent for a combined Yahoo and Bing, based on November data from Web research firm StatCounter.
Approval means Microsoft can begin the task of putting its Bing search engine into Yahoo sites.
The companies aim to get the partnership fully operational in the US by the end of this year. The partnership should be globally complete by early 2012.
The deal had already been cleared by regulators in Australia, Brazil and Canada, but needed US and European approval to take effect. The companies said they are still working with regulators in South Korea, Taiwan and Japan.
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