It’s DEAL between two giants ! Microsoft and Yahoo! announced early on Wednesday 29th July 2009, that they had reach agreement in cooperation on both their network search, and the lucrative advertisement service, in bid to put forward more resistances on the formidable competitor, the Web Supremo Google.com .

Thanks to the early success of Bing.com , this 10 year cooperative agreement does appear to be of beneficially to both party in their face-of with supremo Google . According to source, Microsoft will provide its search platform in Yahoo!’s website, while Yahoo! will be responsible for both search and advertisement services. For the first 5years period,  Microsoft stands to gain from Yahoo! search advertising earning portion of 12%. As Yahoo retain 88% of the profit, it would gains about $500millions US Dollars in yearly operating income, with saving of about $200 millions US Dollars in capital expenditures. Further by these, Yahoo also estimated that the deal would bring benefit of $250 millions US Dollars in yearly operating cash flow.

Some of the terms of the Microsoft-Yahoo partnership:

• This agreement will last for 10 years, but can be prolonged.
• Both companies will keep current display advertising business, and sales force separately.
• Microsoft will buy the Yahoo’s search technologies 10 year license.
• Bing will become the exclusive search technology for Yahoo websites.
• Microsoft will pay TAC ( traffic acquisitions cost ) to Yahoo at a rate of 88% of the ad sales revenue during the first five years.
• Microsoft will guarantee Yahoo!’s O&O revenue per search (RPS) in each country for the first 18 months following initial implementation in that country.
• Full implementation is expected within 24 months after regulatory approval.
• The agreement protects consumer privacy by limiting the data shared between the companies to the minimum necessary to operate and improve the combined search platform, and restricts the use of search data shared between the companies. The agreement maintains the industry-leading privacy practices that each company follows today.

*Full detail can be reached at http://www.choicevalueinnovation.com/thedeal/pressroom/Default.aspx

Separately, at last month comscore’s data, Yahoo had an estimated of 19.6% while Microsoft had 8.4% in market share. After these two giant sealed on the cooperative deal, their market share looks set to occupy 28% of USA search market ( which is still a far short of the supremo Google market share ) . Clearly, this deal doesn’t likely to shake off Google position as the leader in market anytime soon. Maybe, Microsoft and Yahoo could just set their sight on grabbing 50% of market share, which is more possible.

At first glance, it may seems like good and smart move for both Microsoft and Yahoo!  With their smaller market share each in online advertising, having corporation would help in boosting their presence, in facing the current Web Supremo Google. Further, Yahoo! will also save quit substantially on its operational costs.

However, as we should be well aware of, executing the deal could in details could really be a disaster to both party. If we look at the agreement, Yahoo! will be tasked on “Selling” part, while Microsoft will be held responsible for the “Support”. It’s looks more like a division out tasks in a large MNC . When two division didn’t communicate properly, right from the bottom level, up to the top, what could it possibly ends up with -> TROUBLE !

Every company should knows that Sales and Supports have to works hand-in-hand. Falling so would just create more trouble, and it just snowball until someone put an end to it. So, are Microsoft and Yahoo really capable of executing this agreement in details ? Let’s see…

Whatever it is for now, both has to defend their deal when it face with Anti-Trust Committee, which looks like Google would love to see them passing the deal. Well, by then Google would be able to claim that it is not dominating the WEB, with this Microsoft and Yahoo deal. This could really help when Google continue to expand its muscle online.

So, who really stands to gain ? As Yahoo puts it in its ycorpblog.com -> Better Search, Better Everything Else, Better Competition ! Well, web users should be the one who gain .