Microsoft and Yahoo search engine deal approved in Australia, Canada

By Emma Thelwell, ninemsn Money

Microsoft and Yahoo are set to launch a fresh challenge to Google's dominance of the internet search market, after Australia and Canada approved a tie-up between the two tech giants.

The Australian Competition and Consumer Commission (ACCC) said today it would not block a deal between Microsoft and Yahoo to combine search engine technology.

The ACCC and the Canadian Competition Bureau are the first regulators in the world to approve the deal, which would give Microsoft an exclusive licence to power Yahoo's search engine for 10 years.

Microsoft's search engine, Bing, was launched in June this year and is managed in Australia by ninemsn.

It has attracted more than 3 million Australian visitors so far this year and already generates 36 percent more 'clicks' than Yahoo!7's search in Australia.

Microsoft and Yahoo said the tie-up would save the two companies around US$200 million in expenses, and boost cash flow by around $275 million a year.

The ACCC said the move to combine the search technology of the two tech giants would not hurt competition in the local market, which is still dominated by Google.

Search engine behemoth Google reportedly attracts the lion's share of internet searches, with 70 percent of the market.

"In combining search engine platforms, Microsoft and Yahoo may have been able to achieve the necessary scale to provide effective and sustainable competition to Google, which had a very large share of online paid search advertising queries," the ACCC said in its report.

Earlier this year, Microsoft chief executive Steve Ballmer said the deal would provide Bing with the necessary scale to more effectively compete.

In a statement today, Microsoft said: "We continue to believe that this deal will create a true, competitive alternative in the marketplace that will benefit consumers, advertisers and publishers."

The deal awaits approval in the US and Europe, but is expected to be given the green light across the board by early 2010.

Microsoft said today that the details of the deal in Australia were still under negotiation, but it would have no impact on either company's websites or products, such as email, instant messaging, or display advertising.