Trouble Right Out of the Search Engine Box

Microsoft and Yahoo’s merger is already causing some strife among investors and advertisers who aren’t sure they like the scope of the agreement.

The two major companies joined forces with a 10-year agreement to work on their web search technology together in hopes of rivaling the far-ahead market leader Google. The advertising expertise of Yahoo and the search engine research of Microsoft should make a fairly potent – if not game-ending – combination, but others are skeptical.

Investor shares dropped 12%, showing the disappointment many felt that Yahoo was not to receive any up-front payments, in addition to lower revenue-sharing and cost-savings agreements than had previously been speculated. Microsoft investors seemed a little more enthusiastic about the deal, closing at 1.4% up. Google dropped slightly, but not enough to raise any eyebrows – a scant 0.8%.

Even now, the deal hasn’t been fully implemented. It could take up to two and a half years to get approval and pass antitrust and privacy regulations.

Yahoo had previously attempted a merger with Google, which was dropped for antitrust and privacy reasons after the U.S. Justice Department began to look into it. The Obama administration may look more kindly on this merger to create competition for Google, but that theory is yet to be tested.

That’s a lot of obstacles for the merger to get through, but they may yet rival Google in years to come if they can manage it. All there is left to do is wait and see – and search online for updates.