Well well well, who would have thought Yahoo once the biggest search engine and microsoft, the leader in the home pc market are forming a deal. About time too, neither was succeeding the search area and now combined they will provide the biggest competition against google. Comscore’s data showed that in the United States, Bing handled 8.4% of searches in June, compare to Yahoo’s 20% and google’s 65%.

So in this deal, Microsoft’s technology will power Yahoo’s search results, while Yahoo will handle ad-selling duties for both companies’ search sites.Microsoft will reap all the revenues from advertising carried on its new search engine Bing, and pay its partner 88% of revenues from search advertising across websites owned and operated by Yahoo!

Both parties appear to be happy with the deal after 18 months of negotiation. Microsoft CEO Steve Ballmer said; “This agreement gives us the scale and resources to create the future of search. Success in search requires both innovation and scale. With our new Bing search platform, we’ve created breakthrough innovation and features. This agreement with Yahoo will provide the scale we need to deliver even more rapid advances in relevancy and usefulness.” The agreement is for 10 years in which Microsoft will have an exclusive 10 year license to Yahoo!’s core search technologies, and the ability to integrate Yahoo! search technologies into its existing web search platforms.

Microsoft will be able to incorporate Yahoo’s search technology, including its Panama ad-selling tool, but the companies will use Microsoft’s AdCenter sales tool and Bing search engine to power both sites.

Yahoo! has lost market share over the past few years and this deal cements the message that it does not have a role in search. How will Yahoo! now rebrand itself. There is still a lot of legal work to sort out so while the two companies are going through this and working as a new team, Google will continue to dominate the search market.