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It has been announced today that Microsoft and Yahoo! have finally struck a deal that will help them challenge Google’s dominance online after several bids by Microsoft to takeover Yahoo! were knocked back in 2008.

The ten-year deal means that Microsoft’s Bing search engine will power the Yahoo! website and that Yahoo! will in turn become the advertising sales team for Microsoft’s online offering. Part of the deal is that Yahoo! gets to keep 88% of the revenue from all search ad sales on its site for the first five years of the deal. They will also have the right to sell adverts on some Microsoft sites.

This could be good news for both companies, with their individual market shares lagging far behind Google’s with Yahoo! also struggling to turn a profit in recent years. The union will give the two companies a market share of around 30% in the US, offering a much larger audience for Bing. However, whilst the deal may be good news for some, it has been announced that job losses are to be expected at Yahoo! with some staff transferring to Microsoft and others being made redundant.

There is certainly great potential for this deal to beneficial for both the companies and for users, as their union could be much greater than the sum of its parts. Microsoft could potentially generate much higher advertising revenues if they can attract a greater audience and of course, if they can get the advertisers on side. If this revenue helps to drive innovation and advancements then this could be a good thing for everyone involved (except Google) but only time will tell how effective this link-up will be.