Beyond web logs

Microsoft's search engine will power the Yahoo website and Yahoo will in turn become the advertising sales team for Microsoft's online offering.

Yahoo has been struggling to make profits in recent years.

But last year it rebuffed several takeover bids from Microsoft in an attempt to go it alone.

Microsoft boss Steve Ballmer said the 10-year deal would provide Microsoft's search engine, Bing, with the necessary scale to compete.

"Through this agreement with Yahoo, we will create more innovation in search, better value for advertisers, and real consumer choice in a market currently dominated by a single company," said Mr Ballmer.

In return for ceding control of its search engine, Yahoo will get to keep 88% of the revenue from all search ad sales on its site for the first five years of the deal, and have the right to sell adverts on some Microsoft sites.

"In simple terms, Microsoft will now power Yahoo!\ search while Yahoo! will become the exclusive worldwide relationship sales force for both companies' premium search advertisers," The companies said in a joint statement.

Though less expansive than the all-out acquisition Microsoft proposed last year--and even than some of the search partnerships once discussed, the deal allows the companies to share resources and combine scale. Even together, the two companies have only about 30 percent of the search market compared to Google, which has more than twice that amount.

"This agreement gives us the scale and resources to create the future of search," Microsoft CEO Steve Ballmer said in a statement. "Success in search requires both innovation and scale. With our new Bing search platform, we've created breakthrough innovation and features. This agreement with Yahoo will provide the scale we need to deliver even more rapid advances in relevancy and usefulness."

Yahoo CEO Carol Bartz, meanwhile, said that the move will help Yahoo focus on other areas, also adding that the move has the full support of the company's board (lest anyone wonder what Carl Icahn thinks about the more limited deal).