What Yahoo, Microsoft Alliance Means For Tech ETFs

One of the most potentially significant deals in internet history has gone down between Yahoo and Microsoft. But what it will mean for exchange traded funds (ETFs) and shares in those companies is up in the air.

Microsoft (MSFT) and Yahoo (YHOO) have reached a 10-year web search deal and advertising partnership after years of speculation about a delay. Microsoft is the world’s biggest software firm and Yahoo is the leading online portal, and together, they could create a major rival to Google (GOOG).

The alliance may be a boon to both companies. The Economist explains that Microsoft will significantly increase the use of its search service, Bing, as well as its online advertising platform. This means Yahoo will no longer need to spend money on its search and ad technologies.

Here are more highlights, according to Barry Schwartz for Search Engine Land:

• Microsoft will acquire an exclusive 10-year license to Yahoo’s core search technologies, and Microsoft will have the ability to integrate Yahoo search technologies into its existing web search platforms.
• Microsoft’s Bing will be the exclusive algorithmic search and paid search platform for Yahoo sites. Yahoo will continue to use its technology and data in other areas of its business.
• Yahoo will be the sales force for both companies premium searches, however, each company will maintain its own separate display advertising business and sales force.

After regulatory approval, the deal will be in place and in working order by 2010.

ETFs may be the best play on this deal, because questions still remain about its ultimate impact. Will Google continue to thrive, or will this new alliance shrink its search engine market share? An ETF can cover all your bases.

• Technology Select Sector SPDR (XLK): up 29% year-to-date; Microsoft 10.3%; Google 4.9%; Yahoo 1.3%

• iShares Dow Jones U.S. Technology (IYW): up 37.8% year-to-date; Microsoft 12.2%; Google 6.5%; Yahoo 1.3%

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