Wednesdays unveiling of the long-term partnership of Microsoft and Yahoo! to run their search engines jointly has hit Yahoo!’s share price hard, whilst Microsoft’s seems to be holding up. Wall Street clearly sees Microsoft as having come out with the better deal from the agreement despite Yahoo! reportedly receiving 88 percent of the ad revenue from the long-term agreement.

An address to a gathering of financial and industry analysts by Microsoft’s Chief Executive, Steven Ballmer on Thursday did nothing to halt the slide despite revealing how surprised he was with the markets reaction to the deal. He also suggested that Yahoo! were forecast to gain more from the new agreement because of the way the deal was structured. Yahoo!’s stock slipped 12 percent shortly following the announcement on Wednesday and a further 3½ percent in Thursday’s trading.

Many in the search marketing industry clearly see the convergence of the two former rivals as having a much greater chance to compete with Google than when they were separate. It is yet to be seen whether the financial analysts concur with this view in the longer term. Meanwhile search engine optimisation firms will be looking hard at what this will mean for them and their clients as Microsoft roll out the search engine technology behind the recently coveted Bing platform into Yahoo!’s web portals.