For Yahoo! It's goodbye Microsoft, hello Google

Stuart Corner
Friday, 13 June 2008 05:47

Your IT - Home IT

Within hours of terminating acquisitions discussions with Microsoft Yahoo! has announced a deal with Google that will see Google AdSense ads popping up on Yahoo! alongside relevant Yahoo! search results, and the two will enable their instant messaging systems to interoperate.

The ad deal applies only to the US and Canada. It gives Yahoo! the option to display Google ads alongside its own natural search results in the US and Canada and to serve contextually targeted ads on its US and Canadian web properties as well as on its current publisher partner sites. Yahoo! say it expects the agreement to generate an estimated $US250 million to $US450 million in incremental operating cash flow in the first 12 months. It plans to use some of the funds to invest in ongoing initiatives such as algorithmic search innovation and search and display advertising platforms.

The agreement is non-exclusive, giving Yahoo! the ability to display paid search results from Google, other third parties, and Yahoo!’s own Panama marketplace. Under the terms of the agreement, Yahoo! will select the search term queries for which – and the pages on which – Yahoo! may offer Google paid search results. Yahoo! will define its users’ experience and will determine the number and placement of the results provided by Google and the mix of paid results provided by Panama, Google or other providers. The agreement applies to paid search and content match and does not apply to algorithmic search.

Yahoo! CEO and co-founder Jerry Yang said, “We believe that the convergence of search and display is the next major development in the evolution of the rapidly changing online advertising industry. Our strategies are specifically designed to capitalise on this convergence -- and this agreement helps us move them forward in a significant way. It also represents an important next step in our open strategy, building on the progress we have already made in advancing a more open marketplace.”

The agreement is for a four-year initial term and two, three-year renewals at Yahoo!’s option. Advertisers will continue to pay Yahoo! directly for clicks served by Yahoo! from Yahoo!’s Panama and Content Match marketplaces. Advertisers will pay Google directly for each click on Google paid search results appearing on Yahoo! owned and operated network or certain affiliate sites. Google will share a percentage of such revenue with Yahoo!