Microsoft-Yahoo search deal: 3 reasons why it makes sense

A mega-push to take on rival Google

3. Yahoo knows how to outsource search

Having started as a human-created directory of Web sites rather than a search engine, Yahoo arguably has neglected search almost as much as Microsoft historically did.

For many years, Yahoo used search technology from Inktomi Corp., culminating in its purchase of the company in 2002. Just a year later, it bought Overture Services Inc., which owned the AlltheWeb and AltaVista search engines.

Despite owning all of these search engines, Yahoo continued to license search technology from Google for several years, before deciding to go back to the drawing board and roll its own, the current Yahoo Search.

While Yahoo Search has rebounded and holds more market share than Bing as of Monday, according to StatCounter, it appears to benefit mostly from integration with Yahoo's many portal properties, as well as Yahoo's expertise at selling to advertisers.

Meanwhile, financially struggling Yahoo lacks Microsoft's deep pockets to invest in either improving Yahoo Search's technology or marketing it.

CEO Steve Ballmer has said Microsoft is willing to commit up to $US11 billion a year on Bing in order to catch up to Google.

While dropping Yahoo Search could leave the company vulnerable if Microsoft ever decides to abandon the deal, in the near term it will save Yahoo lots of money and help it reap billions, too.

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Eric Lai

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