Microsoft, Yahoo may finally embrace with search, advertising deal

Update: Such a deal has just been announced.

Yahoo and Microsoft are close to a search and advertising deal that would finally bring them together in a fight against Google’s dominance, according to the Wall Street Journal. Yahoo would use Microsoft’s Bing search engine for its properties and handle sales for some text ads in search results. The deal would deliver the pair 30 percent of the search market against Google’s 65 percent.

For Microsoft, the agreement would boost traffic for its newly launched Bing search engine and give the company part of what it wanted in its failed takeover attempt. Yahoo would get to continue selling advertising and cut costs by relinquishing an expensive effort to keep up with Google’s search technology. The deal wouldn’t include an upfront payment to Yahoo and would instead focus on a revenue share, according to AllThingsD.

Yahoo’s once icy relationship with Microsoft has thawed  since the arrival of Yahoo’s new CEO, Carol Bartz, who said in May she was open to talking to Microsoft if the deal came with “boatloads of money,” “good data” and “good technology.”