It seems like long standing rumours about a possible Microsoft, Yahoo search and advertising merger are about to come true.

Microsoft have had good sucess with the launch of its new search engine Bing (offcourse it also paid handsomely for advertising), and it is expected that Bing will power Yahoo search under the new deal. Yahoo meanwhile will be take charge of all advertising.

There will be upfront fee paid, according to a source close to all the action. Both companies will focus on sharing revenue. The deal is expected to be formally announced tomorrow.

Google has a large proportion of search engine queries, around 65% in the US. Yahoo is a distant second with around 20% while Microsoft is just under 10%.

Microsofts Bing has been growing around 20% a week for the past two months and recently broke into the worlds top 20 most visited websites. The merger will make Bing the second biggest search engine with a 30% market share.

Looks like google has some tough competition on its hand.