As expected, Microsoft and Yahoo announced a partnership this morning that will essentially stick Microsoft's recently relaunched search engine Bing in place of Yahoo search and Yahoo's ad sales in place of Microsoft's. The two companies said that their complementary strengths would help them become a stronger market competitor (to *cough* Google), and that the deal would spur innovation in search, better value for advertisers, and "real consumer choice."

The terms of the initial agreement will last for 10 years wherein Bing will be the "exclusive algorithmic search and paid search platform" for all Yahoo sites. The companies aren't giving up on Yahoo's search, though, as Microsoft will also have a 10-year license to Yahoo's core search technologies and the ability integrate Yahoo's search mojo into Bing. Yahoo will also be responsible for ad sales for both companies' premium advertisers, though self-serve advertising will still be handled by Microsoft's AdCenter.

The two companies have established a revenue sharing agreement on the traffic generated on Yahoo's sites, and Microsoft has agreed to pay traffic acquisition costs at 88 percent of search revenue generated by Yahoo during the first five years. Microsoft will also guarantee the revenue per search for Yahoo-owned and -operated sites for the first 18 months. The companies emphasized that the deal protects consumer privacy and limits the data shared between the companies to the minimum needed to improve the platforms.

"Success in search requires both innovation and scale," Microsoft CEO Steve Ballmer said in a statement. "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. Microsoft and Yahoo! know there’s so much more that search could be. This agreement gives us the scale and resources to create the future of search."

Though the announcement makes no mention of Google, it does acknowledge the search and advertising giant in passing. "Providing a viable alternative to advertisers, this deal will combine Yahoo! and Microsoft search marketplaces so that advertisers no longer have to rely on one company that dominates more than 70 percent of all search," the companies said in a statement. This is what Microhoo is referring to when it claims there will be greater competition—from their perspective, they'll be a bigger force to be reckoned with when it comes to battling Google, though it means that there will be fewer independent players from the consumer perspective.

Google, for its part, is staying silent for the time being. Considering how much trouble the company had when it tried to ink its own advertising deal with Yahoo, Google knows that regulators are already frothing at the mouth to dig into this one. According to unnamed Google sources speaking to Kara Swisher, however, the company is keeping on its toes and watching the deal carefully. "We take nothing for granted, because anyone can make a comeback," Swisher quotes a Google employee as saying.