Microsoft and Yahoo are both expected to see double-digit increases in search revenue once their partnership system is implemented. Combined, the two companies have a better opportunity to take on Google.
Market leader Google has been the main source for searches and search advertisements for more than a decade. But Microsoft’s Bing newcomer has proved it is a strong contender and that should increase with the Microsoft and Yahoo deal.
Yusuf Mehdi, senior vice president of online business at Microsoft, spoke about the deal and Bing’s progress at the Credit First Suisse Technology Conference on Tuesday. Mehdi has been involved in the Bing research and development efforts and in the partnership with Yahoo.
The drawn-out negotiations between Microsoft and Yahoo ended in July and the partnership has not yet been finalized, but Mehdi said he is optimistic.
Microsoft needs the deal to work. The software giant has acknowledged the partnership will cost $100 million to $200 million in the first year. Combining Yahoo’s and Microsoft’s search systems is not only costly, but takes time.
Mehdi said when the transition is complete, the deal will boost revenue for Microsoft and Yahoo because search advertising prices are based, in part, on scale. The theory is that the more users you reach, the more advertisers you gain, and the more advertisers you gain, the more bidding power you have.
Once a regulatory process is completed, Microsoft expects the deal to be approved early in 2010.
Acknowledging that Microsoft has a long way to go in search against Google, Mehdi said the company is ahead of its own internal projections on how well Bing would do. Market share has grown each month.
In the six months since launch, Bing has increased its market share from 8.4 percent to 9.9 percent, according to comScore. During…