Microsoft announced a deal with Yahoo in which Bing would power the portal’s search for the next decade. Consumers could still perform searches at yahoo.com, but Microsoft would provide the results and the automated buying platform for advertisers. Yahoo would provide the worldwide relationship sales force for both companies’ premium search advertisers.

The move, meant to challenge the industry giant by consolidating about 26% of search share to Google’s 65%, is currently in regulatory review and is expected to be implemented next year.

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Google is still in a very commanding position with a 65% market share worldwide (higher in the UK where it stands above 90%). And it’s this dominance of the market that makes Microsoft and Yahoo’s partnership such good news. A stronger player in the search market that offers credible competition to Google can potentially work for advertisers.

Online has traditionally been an area that has seen great competition and this competition have driven technological innovation that has benefited everyone.

Microsoft has invested billions in search technology and is counting on Bing, unveiled last month, to seriously challenge Google. Bing has driven mostly positive responses from those who have used it but this deal with Yahoo will allow them to show it to a much wider audience. Google won’t sit idle and allow its market share to be eaten away.

It has already announced measures to upgrade its own search engine with ‘Google Caffeine’. While this could also be a PR exercise to counter the buzz around the Microsoft/Yahoos partnership, Google Caffeine is seeking to improve search results in terms of size of index, indexing speed, accuracy, comprehensiveness and relevancy of search results. Google is also going after Microsoft’s traditional business with news of developing a free operating system for inexpensive PCs as a challenge for Microsoft Windows.

This increased competition in the online world will lead to better services for consumers, advertisers and publishers. While the actual partnership between Microsoft and Yahoo is still a few years away, the threat has already caused Google to up its game.

At the same time, if Bing is to catch Google, both Microsoft and Yahoo will be forced to be extremely innovative with their products to eat into the Google lead.

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