Yahoo Japan, Japan’s largest Internet portal operator, will adopt Google’s search engine, refusing to follow Yahoo Inc in choosing Microsoft as a partner.
Yahoo Japan, which currently uses Yahoo Inc’s search technology, and Google together would control almost all of the search market in the word’s second-biggest economy.
The deal stands in stark contrast to the decision by Yahoo Inc, which owns roughly one-third of Yahoo Japan, to integrate its search technology with Microsoft after the U.S. government blocked a potential tie-up with Google.
Yahoo Japan, which hopes the deal will strengthen its No. 1 position in the domestic market, will also adopt Google’s search-linked advertisement delivery system and feed its data to Google sites.
The deal was seen by some as underscoring Microsoft’s weaker position in search.
“If this Yahoo Japan and Google partnership works well, other search engine and portal site players all over the world may start adopting Google’s technology,” said Mitsushige Akino, chief fund manger at Ichiyoshi Investment Management.
At a news conference, Yahoo Japan President Masahiro Inoue said the Japanese firm had after a thorough investigation concluded that Microsoft’s search technology was not sufficiently strong enough for its needs, giving Japanese language search capabilities as one example.
Yahoo Japan shares gained 1.2 percent on reports of an imminent deal while the broader market was flat. The announcement came after the close of trading hours.
Yahoo Japan said in a statement Yahoo Inc will remain a strategic partner for the Japanese portal site and the U.S. firm will maintain its stake. Yahoo Japan will still use the Yahoo brand.
The Japanese firm also said it has confirmed with the Japanese government that the partnership with Google will not violate antitrust regulations.
Yahoo Inc, Yahoo Japan’s second-biggest shareholder after Softbank Corp, signed a 10-year deal with Microsoft last year to save hundreds of millions of dollars a year in expenses by shifting Web indexing chores to Microsoft while Yahoo focuses on improving searching.
Yahoo Inc executives have said the company expects to complete the search technology integration in all 59 countries in which it operates by the second quarter of 2012.