Tokyo, Japan — In what appears be a surprising blow to the massive search alliance between Microsoft and Yahoo — Japan’s top Internet portal Yahoo Japan and search engine giant Google Inc., is working on a deal to grab the algorithmic search business for Yahoo Japan, the apparent deal that would dominate the Japanese market and be a possible blow to Microsoft, technology blog All Things Digital reported Tuesday.
According to technology blog All Things Digital, the deal between Yahoo Japan and the U.S. search engine behemoth could be announced as early as today in Japan, when Yahoo Japan presents its financial results at 3:10 pm Japan time on July 27, which is 11:10 pm PT today, and could be part of a bigger deal between the two companies around mobile or other products.
Financial terms of such a deal were still under wraps.
Google appears to be targeting a deal with Yahoo Japan, the Nikkei business daily reported that Yahoo Japan would probably change its search engine to Google’s from US-based Yahoo Inc.’s engine.
Yahoo Japan spokesman Toru Nagano said the firm is exploring the possibility of switching its search engine but declined to say whether Google was an option.
Yahoo Inc. endorsed a 10-year agreement with Microsoft in July 2009 to preserve hundreds of millions of dollars a year in expenses by shifting Web indexing chores to Microsoft while Yahoo focuses on improving searching.
Yahoo executives have asserted that the company expects to finalize integration of its search technology with Microsoft in all 59 countries in which it operates by the second quarter of 2012.
Yahoo Inc possesses just a little more than a third of Yahoo Japan and is its second-biggest shareholder after Softbank Corp. However, if Google and Yahoo Japan do forges an alliance, the pair will dominate almost the entire market share of search in the Japanese market. Paid search is apparently not part of this deal at this time.
But in search query volume, Yahoo Japan currently has just over a 56 percent share of the search market and Google has just over 31 percent. Microsoft has almost a three percent share.
Both SoftBank Founder Masayoshi Son — one of the first major investors in Yahoo — and Yahoo Co-founder Jerry Yang remains on the board of Yahoo Japan, which is operated independently and run by President and CEO Masahiro Inoue.
Last year, when Yahoo and Microsoft endorsed their wide-ranging search and online advertising partnership, an alliance aimed at boosting competition with Google, which has two-thirds of the global market, Yahoo Japan–which now employs Yahoo’s technology for algorithmic search, was free to pick whatever search service it wanted.
Hence, the autonomously operated Japanese firm is not obliged to use Microsoft’s Bing technology, which will power Yahoo in the United States by the end of the year and will also be used in other countries where Yahoo! operates, said the report.
Emails and calls to spokespeople at Yahoo, Yahoo Japan and SoftBank seeking confirmation were not answered as yet. Microsoft declined to comment.
Yahoo Japan shares increased 1.4 percent to 35,250 yen while the broader market was flat.