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Wed 29 Jul 2009 11:00 AM

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Sources: Yahoo! agrees to search with Microsoft

New deal is said to focus on revenue sharing with Microsoft’s search technology used on Yahoo! sites

Microsoft and Yahoo! are rumoured to have agreed on a search and advertising deal that will be announced formally later today, inside sources have revealed.

Almost a year after Microsoft’s $44.6 billion buyout offer was unceremoniously rebuffed by Yahoo! and months of further negotiations, respected blog site AllThingsDigital and weekly newspaper Advertising Age are now reporting that the two companies have reached an agreement.

“…there will be no upfront payment to Yahoo, with the focus on a revenue share between the two companies,” the report on AllThingsDigital stated based on the input of “multiple sources”.

The new deal will see Microsoft’s search and advertising sales technology used on Yahoo! sites. Additionally, Yahoo! would still sell search ads on its sites as well Microsoft’s latest search offering - Bing.

In terms of numbers, Yahoo! is expected to keep 110% of all revenue for the first two years of the deal, and 90% for the third. Since Yahoo! will be selling for both, this deal could easily see Yahoo! rake in billions.

For Microsoft however, the deal would make it the number two search player after behemoth Google.

While the deal may not seem as spectacular as previous offers being tossed around both companies, the formal announcement expected later today will change the world of search as we know it and could see still more surprises thrown in.

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