Microsoft has finally convinced Yahoo to use its search engine (Bing) in the web’s most trafficked property. For Microsoft, this will be a great way to show its search engine, Bing, to a large internet audience. Yahoo will be able to stop spending in search-related items, including R&D, and expects the deal to boost its annual profit by $500M. Yahoo will continue to sell ads for the Bing-powered Yahoo Search, but also for Bing.com.
If Yahoo stops its efforts on search, will it be able to come back in 10 years, when the deal ends? It seems unlikely, but Yahoo still has the option to use a core team of engineers to research the subject, without any operational hindering.
In the end, everybody wins, Yahoo can’t afford to pursue its current course and Microsoft’s search market share will jump from 8% to 28% (Yahoo’s share was about 20%). Bing is frankly much better than MSN/Live Search used to be, but Microsoft did a poor job of educating the public about Bing’s new features, like the video search.