Yahoo! Japan opts for Google services over Microsoft

The deal, which will see Yahoo! Japan employ Google technology to power its search engine and online advertising systems, means that between them, Google and Yahoo! will control almost all of the search market in the world's second largest economy, and third largest internet population.

For Microsoft this is a major blow, and serves to confirm their dwindling authority in Japan; currently Microsoft retain only a 3% share in the Japanese search market. When compared to the 80 or so per cent held by Yahoo! Japan and Google, the future of Microsoft in Japan looks definitively weak.

This partnership was tried last year in the US, but legal intervention prevented the deal from getting off the ground. Instead, the California based Yahoo Inc. teamed up with Microsoft to utilise their Bing search engine.

It should be noted that Yahoo! Japan is a quite separate entity from Yahoo! Inc., which owns approximately one third of the Japanese based operation. A 40% share of Yahoo! Japan is held by Tokyo-based internet and mobile phone provider Softbank Corp., whose influence in the country is made plain through its possession of exclusive rights to distribute the iPhone in Japan.

It is not only Yahoo! Japan who will benefit from this partnership. In return for their services, Google will be provided with access to data from Yahoo! Japan's internet properties such as shopping and auction sites. By using this data, Google will hope to consolidate and improve upon its market share in Japan.

It appears that the decision to reject a deal with Microsoft stemmed from the inability of its Bing search engine to command such a significant amount of searches. According to market research company NetRatings, Microsoft provided only 144 million search queries in June this year, a paltry figure in comparison with the 1.6 billion carried out using Google, and the 2.5 billion using the Yahoo! Japan platform.