Microsoft and Yahoo agree web deal

Microsoft and Yahoo have announced a 10-year global search advertising deal which is expected to generate over $500m (£305m) a year. The agreement aims to boost Microsoft's newly launched search engine Bing as well as helping Yahoo to slash its costs during the credit crunch.

According to media reports over the last few days Yahoo were expected to pay Microsoft billions of dollars up front but the two parties have instead agreed on a revenue-sharing deal. The agreement is aimed to help both Microsoft and Yahoo combine to challenge the might of their rival Google.

Microsoft's search engine will now power Yahoo's numerous websites while Yahoo will in turn take charge of Microsoft's online advertising revenue. The internet giant has struggled to generate profits over the last couple of years and was subject to a failed takeover bid by Microsoft last year.

Microsoft chief executive Steve Ballmer spoke about the agreement earlier today: "Through this agreement with Yahoo, we will create more innovation in search, better value for advertisers, and real consumer choice in a market currently dominated by a single company."

Ballmer continued: "Microsoft and Yahoo know there's so much more that search could be. This agreement gives us the scale and resources to create the future of search."

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