Microsoft, Yahoo may partner up at last

— 6:00 AM on July 29, 2009

Ever since the Microsoft-Yahoo merger talks fell through in May 2008, some have been suggesting a search or ad partnership as an alternative. Not even Carl Icahn's efforts seemed to push things in that direction last summer, but now, Reuters reports that a partnership will finally be announced "within 24 hours." So claims an anonymous source privy to the situation.

The source apparently didn't reveal too many details, but Reuters paints a fairly clear picture of what's in store:

Microsoft will not pay an upfront fee to Yahoo, and the focus of the deal is on sharing revenue between the two companies . . . Under the expected deal, Microsoft's new Bing search engine will power Yahoo's searches, according to Advertising Age, while Yahoo will handle the advertising sales, using Microsoft technology.

Bing has already grown Microsoft's search market share since its debut last month, so this partnership could represent an even greater boon. According to the latest ComScore market share figures, Microsoft had 8.4% of the search engine market last month, while Yahoo held 19.6% and Google seized 65%.

On the flip side, regulatory bodies in the U.S. and Europe might throw a damper on the whole thing. Brigantine Advisors analyst Colin Gillis told Reuters that federal regulations could limit "the ability of companies like Yahoo to collect data from users' searches and share it with partners"—supposedly a "key advantage of the partnership."

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