01:02 PM

Bing Overtakes Yahoo In Search

Microsoft's "decision engine" now trails only Google as so-called MicroHoo alliance takes effect.

Microsoft Bing is now the nation's number two search engine, as it surpassed Yahoo in terms of total share in August, according to new numbers from market watcher Nielsen. Google remains in the top spot.

For the month, Bing garnered 13.9% of all U.S. search traffic, up from 13.6% in July, according to Nielsen. Yahoo's share over the same period declined from 14.6% to 13.1%. Google, meanwhile, made a slight gain, as its share increased from 64.2% in July to 65% in August.

That Bing has overtaken Yahoo shouldn't be surprising. Yahoo agreed to outsource search to Microsoft under an alliance struck last year, and the integration went live Aug. 24. Bing is now serving up search results on Yahoo sites.

The integration is thus far complete only in the U.S. and Canada, with other countries to follow. Yahoo also plans to adopt Microsoft's adCenter as its online advertising platform. Microsoft officials have said that work should be complete in the fall.

Microsoft and Yahoo announced the alliance on July 29, 2009. Under the ten-year pact, Microsoft will place its Bing search engine on all Yahoo sites and, initially, keep 12% of the revenue from Yahoo-driven searches. Yahoo will handle sales and marketing for premium search ads for both its own properties and Microsoft's.

Also, Microsoft agreed to hire a minimum of 400 Yahoo employees on a full-time basis as it extends Bing to Yahoo's Web sites. It also agreed to hire an additional 150 Yahoo workers to help with the transition.

Yahoo can terminate the arrangement if search traffic generated by the alliance falls below a specified percentage of rival Google's traffic. Yahoo also retains the right to expand the partnership by adding Microsoft's mapping and mobile search services to its Web properties.

Microsoft must submit to Yahoo copies of all data it collects from its sites while providing search services, according to SEC documents filed by the companies. Yahoo CEO Carol Bartz has said that, by in effect outsourcing search to Microsoft, her company can save $200 million in annual capital expenditures through reduced spending on search-related operations.

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