Microsoft’s 10-year partnership with Yahoo is now official. The news first broke out 6 months ago, after an aborted US$47 billion takeover by Microsoft in 2008. Last night, the company announced that they have obtained the green light from both US and European regulators.

Basically, both Bing and Yahoo will now be powered by Microsoft’s search technology, while Yahoo focuses on selling premium ads. Microsoft will serve PPC ads (i.e.via adCenter) on both Bing and Yahoo, and pay Yahoo for the portion of ads served on the latter’s website. These changes will happen in the background and should be transparent to end-users like you and me.

Both companies will continue to operate under their respective brands and manage their own websites independantly. The search integration is expected to be completed by end-2010 while the advertising adjustments is slated to finish in early 2012.

Microsoft sent an announcement to advertisers this morning and pointed us to their newly-minted resource site about the new alliance - http://www.searchalliance.com.

This purpose of this partnership is obvious, i.e. to take a bite out of Google’s 70% - 90% marketshare.

Will it work? I hardly think so, since we’re all creatures of habit and would unlikely shift to a different search engine unless it offers radical features, e.g. natural search instead of keyword search.

On the advertising side, Google’s already way ahead of the game with their advanced Adwords platform, coupled with Analytics. Thanks to the highly successful Adsense program, Google’s massive content network also lets advertisers reach 81% of Internet users - making Adwords the biggest online advertising program in the world!

> Learn more about Google Adwords Advertising