Microsoft and Yahoo! announced their long-awaited search deal this morning. Here's the press release which includes videos from both CEOs. Here's a site set up to explain the deal and here are the terms laid out by the release:

• The term of the agreement is 10 years;
• Microsoft will acquire an exclusive 10 year license to Yahoo!’s core search technologies, and Microsoft will have the ability to integrate Yahoo! search technologies into its existing web search platforms;
• Microsoft’s Bing will be the exclusive algorithmic search and paid search platform for Yahoo! sites. Yahoo! will continue to use its technology and data in other areas of its business such as enhancing display advertising technology.
• Yahoo! will become the exclusive worldwide relationship sales force for both companies’ premium search advertisers. Self-serve advertising for both companies will be fulfilled by Microsoft’s AdCenter platform, and prices for all search ads will continue to be set by AdCenter’s automated auction process.   
• Each company will maintain its own separate display advertising business and sales force.   
• Yahoo! will innovate and “own” the user experience on Yahoo! properties, including the user experience for search, even though it will be powered by Microsoft technology.   
• Microsoft will compensate Yahoo! through a revenue sharing agreement on traffic generated on Yahoo!’s network of both owned and operated (O&O) and affiliate sites.
• Microsoft will pay traffic acquisition costs (TAC) to Yahoo! at an initial rate of 88% of search revenue generated on Yahoo!’s O&O sites during the first 5 years of the agreement.   
• Yahoo! will continue to syndicate its existing search affiliate partnerships.   
• Microsoft will guarantee Yahoo!’s O&O revenue per search (RPS) in each country for the first 18 months following initial implementation in that country.
• At full implementation (expected to occur within 24 months following regulatory approval), Yahoo! estimates, based on current levels of revenue and current operating expenses, that this agreement will provide a benefit to annual GAAP operating income of approximately $500 million and capital expenditure savings of approximately $200 million. Yahoo! also estimates that this agreement will provide a benefit to annual operating cash flow of approximately $275 million.   
• The agreement protects consumer privacy by limiting the data shared between the companies to the minimum necessary to operate and improve the combined search platform, and restricts the use of search data shared between the companies. The agreement maintains the industry-leading privacy practices that each company follows today.

According to remarks made on the conference call, Yahoo! doesn't have to use Bing/MSFT's technology in mobile. There's more flexibility there for Yahoo! to maintain a separate search technology or work with other partners if it chose to do so. However it sounded like Yahoo! would be using the MSFT/Bing technology there as well. Part of the "flexibility" on the mobile side comes from uncertainty regarding how mobile advertising will play out.

Here's a paraphrase of remarks made by the two CEOs regarding mobile:

Bartz: We have option of using MSFT technology for the mobile experience. It’s not exclusive as on the PC. If somewhere down the road we want to switch we could.We’re very interested in doubling down on the mobile experience. Having an integrated search is important.

Baller: We don’t know all the scenarios involving mobile search. This gives Yahoo flexibility on the mobile side.

The two companies on the PC side are creating a single paid search market. There's more gray in the mobile execution. However I suspect that it will also play out the same way in mobile: a combined market for mobile paid search. On the PC side that means the reach of a combined Microsoft-Yahoo is approaching 30% market share; it will be something comparable on the mobile side.