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T-Mobile USA teams up with Yahoo

T-Mobile has selected Yahoo as its search and advertising partner, as the carrier tries to boost data usage on its mobile handsets.

T-Mobile USA, which is currently rolling out its 3G wireless network across the country, is turning to Yahoo to power its search and mobile Web portal in an effort to boost data usage.

On Thursday T-Mobile said it would use Yahoo's OneSearch as the default search tool on its phones. T-Mobile is rebranding its mobile Web service and calling it Web2go. This service is supposed to provide a better Web browsing experience and easier navigation through a home page on T-Mobile's mobile phones. And it integrates Yahoo's OneSearch tool into it.

Also as part of the deal, Yahoo will offer sponsored search results and in some cases display advertising within the search results presented through T-Mobile's Web2go service. The companies will share the advertising revenue, but further details weren't given.

With close to 3 billion mobile phone users around the world, every major search company is vying for a piece of the action. They're also competing for a piece of the emerging mobile advertising market, which is still in its infancy. As a result, the stakes for the three main search giants--Google, Microsoft, and Yahoo--have never been higher.

Google dominates the search and advertising markets on the traditional Web. And it's already getting a strong foothold in the mobile market. In fact, it also has an important relationship with T-Mobile. Just two months ago, T-Mobile became the first wireless carrier to offer a phone using Google's Android operating system. As part of the deal, the G1, made by phone manufacturer HTC, has several Google applications, such as Gmail, Google search and Google Maps integrated into the device.

Microsoft is also making headway in this market and is believed to be close to signing a deal with Verizon Wireless worth about $550 million to $650 million in guaranteed revenue a year.

Yahoo has worked hard over the past couple of years to make its mark on mobile. The company already has deals with T-Mobile in Europe to power its search in North and Central Europe. O2 in the U.K. is also partnering with Yahoo. In total, Yahoo claims to have about 25 percent market share in Europe and more than 30 percent in the U.K.

Yahoo's OneSearch service is the core of its mobile strategy, and it provides search results that are supposed to be the most useful for someone who is surfing the Web from a mobile phone. Yahoo also provides voice search, allowing users to speak the term they are searching for into their phones instead of typing it into the keypad. Google just announced its voice search for the iPhone this week.

While deals with specific carriers are important today, it's unclear how important they will be in the future. Yahoo's OneSearch can be downloaded from the Web and any mobile user with a browser can search using Google whether it's preloaded on the phone or not. That said, for now, most mobile subscribers using a basic cell phone don't download new applications. And most don't venture beyond the carrier "deck" or menu of choices that it is given to them on their phones.

But that could soon change. As smartphones like Apple's iPhone, all the BlackBerry devices, and new Android phones become increasingly popular among consumers, users are more likely to venture beyond the applications and services preloaded on their phones. Apple has already seen great success with its App Store. More than 3,000 applications are currently available through the App Store, and Apple has said that users downloaded more than 100 million applications between the site's launch on July 11 and the beginning of September.

Research In Motion, the maker of the BlackBerry, and Google are launching application store fronts that will allow subscribers to easily access applications from third party developers.

What this likely means for the mobile market is that mobile users are being conditioned to explore and download content that is not spoon-fed to them by their service provider. And as users get more comfortable exploring the mobile Web on their own, deals such as the one between Yahoo and T-Mobile may become less relevant.

Think of the portal wars of the late 1990s. AOL dominated as a portal provider, but once users realized they could find whatever they wanted or needed on their own, Google emerged as a top destination site providing search, aggregated news, and now a whole slew of new applications.

Still, for the moment, there are millions of basic cell phones on the market. And if carriers want to boost data usage on these devices, they will need a little help from the Microsofts, Yahoos, and Googles of the world.