Pending regulatory approval, Yahoo has finally given up and is now going to use Microsoft’s search technology on their search engine.

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.

Although I still think that this deal is the wrong direction for Yahoo I’m not surprised that it happened. If anything this deal means that Microsoft and Yahoo have a better chance at beating Google at search. I don’t believe that beating Google at search should really be both companies focus but based on this decision it is clear to me that they are more interested in increasing advertising revenue than they are in improving their products.

Update 8/4/09: Tom Krazit reporting for CNET:

Yahoo has the right to terminate the deal signed last week, “if the trailing 12-month average of the (revenue per search) in the United States (the “U.S. RPS”) of Yahoo and Microsoft’s combined queries falls below a specified percentage of Google Inc.’s (“Google”) estimated RPS measured on a comparable basis or if the combined Yahoo! and Microsoft query market share in the United States falls below a specified percentage,” according to a document filed with the U.S. Securities and Exchange Commission.

Update 12/8/09: Nancy Gohring:

Microsoft and Yahoo have finalized the terms of a broad search and advertising agreement intended to help them compete more effectively with Google.