Microsoft and Yahoo have received clearance for their search agreement without restrictions from both the U.S. Department of Justice and the European Commission, and will now turn their attention to implementing the deal.

Implementation of the deal is expected to begin in the coming days and will involve transitioning Yahoo?s algorithmic and paid search platforms to Microsoft, with Yahoo becoming the exclusive relationship sales force for both companies? premium search advertisers globally. While the specific implications for mobile search advertising are still to be determined, the deal is clearly geared toward giving Google a run for its money.

?The combined power of Microsoft and Yahoo helps the two achieve greater scale in both online and mobile search and may make the alliance more appealing to carrier partners, in particular,? said Noah Elkin, senior analyst at eMarketer, New York.

?That said, even working together, Microsoft and Yahoo still have a steep hill to climb if they want to put a serious dent in Google's dominant share of the mobile search market,? he said.

?Sources like StatCounter, which works off of traffic data, give Google well over 90 percent of the market, while firms like comScore that work off of survey data give Google around 50 percent of the market.?

While nothing official has been announced, last month rumors swirled that Apple was in discussions with Microsoft to potentially make Bing the default search engine on the iPhone (see story).

Microsoft?s four-day on-site marketing campaign at the 2010 Consumer Electronics Show earlier this month in Las Vegas drove 8,000 downloads of its Bing mobile search application (see story).

Consumer search experience
Under terms of the agreement, which was announced in late July 2009, Microsoft will provide Yahoo with the same search result listings available through Bing, and Yahoo will innovate around those listings by integrating its content, enhanced listings with organized information about key topics and tools to tailor the experience for Yahoo users.
 
Yahoo will focus on providing a compelling and innovative search experience, while Microsoft will provide the underlying platform.

Despite the deal, both companies will continue to compete for audience, engagement and clicks.

Once the transition is completed, the companies claim that their unified search marketplace will deliver an improved experience for consumers, better volume and efficiency for advertisers and better monetization opportunities for Web publishers through a platform that contains a larger pool of search queries.

Transition timeline
Yahoo and Microsoft will work with advertisers, publishers and developers on a customized plan designed to make the transition as efficient and seamless as possible.

Both companies will begin working closely with most partners well in advance of their planned transition to the Microsoft platform and will communicate important information to partners about the transition periodically via phone, email, webinars and a newly created Web site at http://www.searchalliance.com.

The companies will begin the transition of algorithmic search and have set a goal of completing that effort in at least the United States by the end of 2010.

Additionally, the companies also hope to make significant progress transitioning U.S. advertisers and publishers prior to the 2010 holiday season, but may wait until 2011 if they determine that the transition will be more effective after the holiday season.

All global customers and partners are expected to be transitioned by early 2012.

Customer relationships
Once the transition is in place, Yahoo and Microsoft will each represent and provide customer support to different advertiser segments.

Yahoo?s sales team will exclusively represent and support high-volume advertisers, SEO and SEM agencies, and resellers and their clients.

Microsoft will represent and support self-service advertisers.

Regulatory summary
Although the transaction previously was cleared by regulators in Australia, Brazil and Canada, the terms of the agreement required clearance by U.S. and European regulators before it could commence.

Meanwhile, Microsoft and Yahoo continue to work with regulators in Korea, Taiwan and Japan to ensure that they have all relevant information necessary to evaluate the transaction before the deal commences in those specific jurisdictions.

Can Yahoo-Microsoft alliance beat Google?
While mobile search and mobile advertising targeted based on consumers? search queries are still evolving, they are growing rapidly, and will soon offer significant revenue streams. It will be yet another arena where Microsoft and Yahoo will go head-to-head with Google.

?Microsoft and Yahoo get economy of scale by only needing to operate one engine, and by selling a larger pool of searches from their combined audiences they get a more efficient auction and, ultimately, more advertising customers and better click-through rates,? said Andrew Frank, New York-based research vice president of media industry advisory services at Gartner.

?I believe comScore?s latest figures put Google?s share of the U.S. search engine market at 65.4 percent?that?s searches, not revenue?while Microsoft and Yahoo have a combined share of 27.7 percent,? he said.

While it will not happen this year, it is only a matter of time before mobile search revenue surpasses online search revenue. Healthy competition in the space should be good for innovation.

?Unlike online search, mobile search and mobile search advertising is still a pretty open field with different usage profiles and, most likely, a different path to success, one more in tune with the mobile user?s ?here and now? intention when searching for items like food and entertainment,? Mr. Frank said.

?The Microsoft-Yahoo deal, which is unusual in the sense that the two companies still intend to compete for search audience, is unlikely to extend to the mobile world, where the pressure of a dominant competitor is not strong enough to overcome the impulse to compete through unfettered innovation,? he said.

Other industry insiders are predicting that mobile search will actually be a key component of the alliance.

?It?s good that the government appreciates consolidation that leads to greater competition and has allowed the alliance, which will provide an easier mechanism for advertisers to run PC search campaigns,? said Michael Bayle, vice president of monetization and marketing at Amobee, San Francisco.

?There is an option in the agreement between the two companies that can further accelerate advertisers into mobile by leveraging the companies? combined mobile search capabilities,? he said. ?It would be foolish not to extend that same cooperation to mobile.?

One key component of the alliance could be increased collaboration with wireless carriers.

?What?s compelling, having observed [Google CEO] Eric Schmidt?s keynote at Mobile World Congress, there?s an accelerated interest in partnerships helping operators to earn revenue in mobile, and search is a key factor in that,? Mr. Bayle said.

?Legacy-wise, Yahoo has many carrier partnerships that will be instantly beneficial to Microsoft now that the deal has passed U.S. and European regulatory hurdles,? he said.

Here is a video of Yahoo's CEO Carol Bartz discussing the partnership with Microsoft: