In what is called as the most strategic pact, both Microsoft Corp. and Yahoo Inc. have come together to give a tough competition and challenge to search engine leader Google Inc. As per Yahoo, The pact would give free hand to Microsoft Corp to integrate their Bing search engine on Yahoo!’s interface. If the pact gets a formal regulatory approval, it would be a tough fight for Google Inc.

As per the pact, Microsoft’s AdCenter technology will power the standard sponsored links that appear alongside search results. The sales force at Yahoo will be responsible for selling the premium advertising, based on the search terms for Yahoo Inc. as well as Microsoft Corp.

Yahoo Inc. shares took a nose dive of 11 percent as some of the investors felt that the deal had a limited scope. The reason for disappointment was cornered to exclusion of upfront payments approximating to $1.5 billion or more, as put forth by premier business research organization, Sanford Bernstein.

On the other note, both Microsoft Corp. and Yahoo Inc. are already facing antitrust and breach of privacy issues in the court. It is also alleged that earlier Google Inc. had dropped its plan to enter into partnership on advertising with Yahoo Inc. somewhere around last year. The plan received the blow due to surmounting pressure from the U.S. Justice Department.

Adding to this, spokesperson avowed that it was “interested” in the Microsoft/Yahoo partnership, while the chairman of the U.S. Senate antitrust panel voiced that the deal surely called for attention of “careful scrutiny.”

Analysts opine that it would not be very easy to give a tough fight to Google’s search engine dominance. However, the pact was a right step taken in right direction. According to comScore, Google Inc. holds 65 percent share of the U.S. search market; Yahoo Inc. has 19.6 percent and Microsoft Corp. has 8.4 percent.