After many talks of a simple merger, Yahoo! and Microsoft have now reached out and begun a partnership, or perhaps more practically, an alliance against Google. Yahoo sent out a press release simplifying the new effort’s results: “Microsoft will now power Yahoo! search while Yahoo! will become the exclusive worldwide relationship sales force for both companies’ premium search advertisers”.

The wording tries to be tricky, but the key points lay out the truth: Microsoft’s search model is taking over Yahoo. Basically users can expect at some point that Yahoo will show basically the same results as Bing!

The key part to read in the press release is this:

Microsoft’s Bing will be the exclusive algorithmic search and paid search platform for Yahoo! sites. Yahoo! will continue to use its technology and data in other areas of its business such as enhancing display advertising technology;

Basically, Yahoo will be using the Bing search engine! Perhaps the press releases going around should read differently, saying “Yahoo will now use Bing!”, but that might cause an exodus of users to just go straight to the source (Bing itself).

However, on the other hand, MSN is giving up it’s sales job tasks over to Yahoo, who had done a far better job of it, so it can focus on defeating the Google search algorithms.

Yahoo! will become the exclusive worldwide relationship sales force for both companies’ premium search advertisers. Self-serve advertising for both companies will be fulfilled by Microsoft’s AdCenter platform, and prices for all search ads will continue to be set by AdCenter’s automated auction process;

Basically, since the merger never happened, it seems the two companies have finally found a way to partner up and use each other’s strengths to try and take on the Google behemoth. Both companies will be using their strengths and giving over control of the areas they are weak in to the other company which was better at it.

Yahoo really seems to be thinking this is a win for them (despite no longer powering their own search engine and using Bing), stating that “Microsoft will compensate Yahoo! through a revenue sharing agreement on traffic generated on Yahoo!’s network” and expecting that it will have capital expenditure savings of approximately $200 million, and an annual cash flow bonus of $275 million. Quite the large claims.

Maybe it’s just me, but wasn’t Yahoo a search engine? Yahoo better hope it’s customers who will now be using Bing powered search don’t just go for the real deal: Bing itself. So while Yahoo can claim all these savings and cash flow bonuses (supposing the traffic doesn’t simply leave), the deal was definitely a win-win for Microsoft, and giving tens of millions of Yahoo users a taste of their new Bing search engine could be the big win they need to give Google a run for their money.