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Does MicroHoo Have Staying Power?

While the industry scrambles to sort out the potential impacts of Yahoo's new partnership with Microsoft, the initial response has been generally positive, particularly for the short term.

However, as in most deals that have been as contentious in the making as this one, the real hazards and detours may lurk further down the road.

"It's a marriage made in heaven," Rob Enderle, principal analyst at the Enderle Group, told InternetNews.com. "It uses Yahoo's search share and Microsoft's technology [and] at least short-term, it assures that Yahoo has a future," Enderle added.

The obvious gain comes from unifying Microsoft's (NASDAQ: MSFT) and Yahoo's (NASDAQ: YHOO) search market share and sharing advertising sales to create a much larger second place competitor to Google (NASDAQ: GOOG).

Under the terms of the deal announced Wednesday, Microsoft will power Yahoo's search business with its recently relaunched search engine, Bing, while Yahoo will handle search ad sales, albeit using Microsoft's AdCenter technology to manage ad flow.

Meantime, Yahoo's larger market share and billings will enable Microsoft to compete more head-to-head with Google.

A good time was had by all

"It's very good for both companies, scale is very important, especially when you're going up against a competitor like Google," Matt Rosoff, research vice president for consumer products and services at Directions on Microsoft, told InternetNews.com.

Web metrics firm comScore's figures for June -- the month that Bing launched -- show Google with 65 percent of U.S. Internet searches, compared to Yahoo with 19.6 percent, and Microsoft trailing badly in third place with 8.4 percent. If the deal holds together and passes regulatory approval, the combination would have 28 percent of the market.

"Bing is a good product, but this [deal] immediately increases [Microsoft's] market share from less than ten percent to more than 25 percent," Rosoff said.

Even arch competitor Google had something nice to say, at least until the gloves come off.

"There has traditionally been a lot of competition online, and our experience is that competition brings about great things for users. We're interested to learn more about the deal," said a statement e-mailed to InternetNews.com by a Google spokesperson.

Also on the welcoming committee, if a bit less warm, was Ask.com, which came in fourth on comScore's June ratings with 3.9 percent search market share.

"This news is a solid indication that the search market is healthy and growing across the board … but as far as Microsoft and Yahoo are concerned, the primary focus for both for 2009 and into 2010 will need to be on search integration, and not on search innovation. Our core focus will continue to be innovating for success by putting consumers, and search products, first," Tomasz Imielinski, executive vice president of technology at Ask.com, said in an e-mailed statement.

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