Yahoo! tests the Google route to advertising bliss

Yahoo! will test the use of Google advertisements on some of its search pages, the companies have said, a move that raises the possibility of a significant departure from Yahoo!'s present ad strategy.

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Google spokesman Daniel Rubin said: "Yahoo! will be testing Google's AdSense for Search service, which will deliver relevant ads alongside Yahoo!'s own natural search results. This is only a limited test, and does not necessarily mean that Yahoo! will join the AdSense program."

The test is narrow in scope, Yahoo! said: "The test will apply only to traffic from yahoo.com in the US and will not include Yahoo!'s extended network of affiliate or premium publisher partners. The test is expected to last up to two weeks and will be limited to no more than three per cent of Yahoo! search queries."

The story was first reported yesterday by The Wall Street Journal.

Carrying Google's search-related ads would be a major departure for Yahoo!, which has invested extensively in its own search ad system, Panama. But there is no doubt the company is evaluating serious alternatives, now Microsoft has launched a decreasingly amicable attempt to acquire the company.

Microsoft was quick to raise antitrust concerns about a Google-Yahoo! partnership. Microsoft general counsel Brad Smith said in a statement: "Any definitive agreement between Yahoo! and Google would consolidate over 90 per cent of the search advertising market in Google's hands. This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo!."

The test caught antitrust attention in Washington, which already was on alert after Google's acquisition of internet ad company DoubleClick, which closed in March.

In a statement, Herb Kohl, chairman of the Senate's subcommittee on Antitrust, Competition Policy and Consumer Rights, said: "We will be following closely the results of the short-term test alliance between Yahoo! and Google. Should there be moves to make this agreement permanent, we will examine it closely in the antitrust subcommittee to ensure that it does not harm competition. Following closely on the heels of Google's acquisition of DoubleClick, this Google-Yahoo! alliance would represent even further consolidation in the internet advertising market."

Yahoo! indicated the Google test is part of its attempt to evaluate new business options but offered cautious words about what the test might lead to.

The company said: "As previously announced, Yahoo!'s board of directors is exploring strategic alternatives to maximise stockholder value, including exploration of potential commercial business arrangements…the testing does not necessarily mean that Yahoo! will join the AdSense for Search programme or that any further commercial relationship with Google will result."

The possibility of a Yahoo!-Google ad partnership predates the Microsoft acquisition move in February, The Wall Street Journal said. Citing people familiar with the situation, it reported that Yahoo! already had begun talks to outsource its European web search advertising to Google before the Microsoft move.

Yahoo! lags behind Google both in search market share and in the ad revenue generated for each search, but it's a major website that delivers millions of advertisements daily. Using Google ads could help increase the revenue generated by each ad, depending on how revenue is shared between Google and Yahoo!.

With the prospect of a proxy fight looming after Microsoft chief executive Steve Ballmer gave Yahoo! a three-week ultimatum, Yahoo! shareholders are increasingly important to Yahoo!'s future. This is especially true of institutional investors such as insurance companies that hold large numbers of shares.

Original article: Yahoo to try using Google for search ads from CNET News.com