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Summary:

Microsoft (NSDQ: MSFT) has finalized a mutli-million deal with Verizon Wireless for the right to provide the country’s largest carrier with…

imageMicrosoft (NSDQ: MSFT) has finalized a mutli-million deal with Verizon Wireless for the right to provide the country’s largest carrier with portal, local, Internet search and mobile advertising services. The announcement is expected to take place during Microsoft’s Steve Ballmer’s opening keynote at CES tonight, starting at 6:30 p.m., although Verizon spilled the beans earlier at an investor conference. The search deal was hard fought and lasted nearly two years, in which all three Internet giants *Yahoo*, *Google* and Microsoft were first involved, and then more recently, only Google (NSDQ: GOOG) and Microsoft were left. During the negotiations, the WSJ reported that the deal size ranged between $550 and $650 million, making it a significant coup for the emerging mobile search and advertising industry that is just getting off its feet.

The decision by Verizon Wireless is important for a number of reasons. First off, it gives Microsoft a foot in the door, which had been rapidly closing — the other U.S. carriers were already locked up. If the deal went to Google, it would have owned half the market between Verizon and Sprint (NYSE: S). If it had gone to Yahoo (NSDQ: YHOO), it would have been a landslide victory for the Sunnydale company, which already works with AT&T (NYSE: T) and T-Mobile USA. With Microsoft also in the game, the mobile search industry — especially in the U.S. — is still completely up in the air.

The second thing to point out is the vote of confidence on Microsoft’s behalf that they believe the mobile search and advertising market could be of significant value over a five year period, which is the length of their contract with Verizon (NYSE: VZ). Perhaps it is just buying marketshare, but Medio Systems’ CEO Brian Lent, who provides white-label search services, and to Verizon Wireless specifically, believes differently. “I would suspect that it would be recoupable. Why would anyone would bid that amount?…I think these are not completely unreasonable numbers, given the size of the space. My industry expertise says that over a period of five-ish year period, one should be able to make those types of revenues.”

Some more details: The deal will last for five years and the first devices are supposed to launch in the first half. Searches will integrate voice commands and location-based services, and results will include maps, directions, traffic information, local business information; movie show times, gas prices and weather. In addition, users will be able to search for full-track songs, videos and games. Microsoft’s Live Search will be available on a device

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  1. I currently have prepaid service with TracFone, (which is great because I have theminutes I need and access to text w/out the outragiously high mnthly charges). Will all these live searches be available to prepaid phones as well?

  2. What does this mean for medio & jumptap?

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