It’s understood the deal will see Yahoo sell search ads under Microsoft’s fledgling Bing brand.
Reports suggest there are no upfront payments between the two companies, however a dynamic revenue-share model has been agreed.
In the first two years of the deal Yahoo will retain all search revenues, plus another 10%, dropping to 90% of revenues in year three.
It is unclear whether the move will see any Yahoo or Microsoft staff made redundant.
A Yahoo spokeswoman told new media age, “We don’t comment on rumour or speculation.”
A combined Yahoo and Microsoft search offering will create a much stronger challenger to the dominant Google brand. According to comScore Microsoft and Yahoo have 8% and 20% of US search share respectively, behind Google’s 65%.
The deal comes 18 months after Microsoft launched a multi-billion dollar takeover bid for Yahoo.
Yahoo did strike an $800m (£495m) paid-search deal with Google last year, only to collapse in November following pressure from parties including anti-trust investigators and Microsoft.
Yahoo CEO Carol Bartz is believed to have met with Microsoft counterpart Steve Ballmer to discuss a possible search deal soon after joining the company at the start of the year, however today’s expected announcement will be the first time anything formal has been revealed.
Last week both Yahoo and Microsoft posted online ad revenue declines of 14% and 16% respectively through the second quarter (nma.co.uk 24 July 2009), days after Google revealed its ad revenues were up by 3% over the same period (nma.co.uk 17 July 2009).
Microsoft was unavailable for comment.
This story first appeared on newmediaage.co.uk