Microsoft and Yahoo: together at last

Microsoft's original bid for Yahoo back in January 2008 made the most popular internet destination in the world worth $47.5 billion. The offer was rejected by then CEO Jerry Yang, resulting in Microsoft walking away from the table.

Yang then attempted to tie up Yahoo with Google and use that company's search technology. However, that deal fell at the regulatory hurdle.

Yang's subsequent departure and the drop in quarterly earnings resulted in the lay off of 5 per cent of Yahoo's workforce in April 2009 and showed that new CEO Carol Bartz had to do something.

When Microsoft's new search engine Bing was released in June, with technologies gained from the FAST and Powerset acquisitions, outgunning Yahoo search capabilities, Bartz knew that that something had to be dramatic (See: Bing overtakes Yahoo as No 2 search engine)

Microsoft should be happy; Google should be a bit worried
Under the terms of the agreement (and still subject to regulatory approval on both sides of the Atlantic, as pointrd out in the companion piece, (See: Hello Yahoo - Microsoft, what about the regulators?), Yahoo gets to use Microsoft's Bing search engine rather than its own, and Microsoft gets to pay Yahoo 88 per cent of search revenues arising from Yahoo sites for five years – but, of course, Microsoft also gets to keep $47.5 billion in the bank.

Microsoft gains exclusive licence to Yahoo's search technologies, which Microsoft will be free to integrate into its own. It also gains access to all of Yahoo's long-standing and loyal customers - this author has trusted and relied upon Yahoo! Mail for over 10 years - and Yahoo's self-serve advertising will migrate to Microsoft AdCenter.