Microsoft closing in on Verizon Wireless search deal

Microsoft is reportedly close to finalizing an agreement with Verizon Wireless to become the operator's default search provider, in the process shutting out rival web services giant Google, once considered the prohibitive favorite to land such a deal. Citing sources familiar with the discussions, the Wall Street Journal reports the terms of the agreement call for Microsoft to share revenue with Verizon from ads shown in response to mobile web searches, with guaranteed payments to the carrier totaling approximately $550 million to $650 million over five years--the Journal says that figure is roughly double what Google offered the carrier.

At the same time, Microsoft is negotiating a separate agreement with Verizon Wireless to feature its Windows Mobile operating system in more of the operator's device. The Journal notes that if both deals are consummated, the combined value could top the $1 billion mark.
In August, the Journal first reported on Verizon's plans to streamline its mobile search user experience by creating a one-stop, Google-branded search platform spanning from local information to mobile content acquisition; the proposed deal called for Verizon and Google to share advertising revenues, but several key details of the partnership remained sticking points, most notably Google's demands for access to consumer behavioral data.

With its Yahoo advertising partnership in tatters, it seems logical to expect Google will make a final run at the Verizon deal before conceding defeat--nevertheless, the search kingpin remains in the crosshairs of the Department of Justice, whose opposition to the Yahoo proposal raises serious questions about what kinds of search agreements Google may now pursue. For its part, Microsoft has been vocal in exploiting government concerns over Google's dominance of the search market--executives even called the Google/Yahoo partnership "illegal." But in an interview, Google CEO Eric Schmidt said the DOJ's interference in the Yahoo deal is "unlikely" to affect future decisions. "The particular issues around this one are fairly unique," he said. "I don't think it will change the way we do business. I don't know about perceptions."

For more on the Verizon/Microsoft negotiations:
- read this Wall Street Journal article

Related articles:
Mobile search growing in tandem with smartphone adoption
Forecast: Search will drive mobile ad revenues