Green Light! Regulators Approve Yahoo-Microsoft Search Deal

After six months of regulatory scrutiny, U.S. and European regulators have given Yahoo and Microsoft the go-ahead to consummate their search ad agreement.

In a statement this morning, the companies said the U.S. Department of Justice and the European Commission had cleared the deal. The pact, announced in July, will make Bing the default provider of algorithmic and paid search services on Yahoo sites for the next 10 years.

The integration will not take place overnight. The companies expect to take until the end of this year to migrate Yahoo’s algorithmic search to Bing, and the migration of U.S. advertisers and publishers – while expected before the 2010 holiday season – may take even longer than that, they said.

Global advertising customers are expected to make the transition by early 2012.

“Although we are just at the beginning of this process, we have reached an exciting milestone,” said Microsoft CEO Steve Ballmer. “I believe that together, Microsoft and Yahoo! will promote more choice, better value and greater innovation to our customers as well as to advertisers and publishers.”

Once it takes effect, the combined Bing/Yahoo search experience will produce a contender with roughly 30 percent of the search market, to Google’s approximately 65 percent. It will be a degree of competition Google hasn’t faced since Yahoo last held 30 percent of the market in approximately early 2006.

Under the deal, self-serve advertising for search campaigns on both sites will be handled by Microsoft’s AdCenter platform, as Yahoo licenses both its search technology and its Panama ad buying system to Microsoft for the life of the deal. However Yahoo will retain control of search advertising sales for premium, human-sold campaigns on both Microsoft and Yahoo-owned Web sites.

In a statement the companies noted the deal was previously approved in Australia, Canada, and Brazil. They said they would continue working with Korean, Chinese, and Japanese regulators to address concerns raised by the agreement.

In a statement, the European Commission said its investigation found that scale is key to effective competition in search, and that Microsoft’s acquisition of Yahoo’s search business would be a means to that end.

It noted, “Not only market participants do not expect the transaction to have any negative effects on competition or on their business but they also expect it to increase competition in internet search and search advertising by allowing Microsoft to become a stronger competitor to Google.”

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