Yahoo in Ad-Placing Deal With Google

14 April 2008

SUNNYVALE, California: Yahoo has announced a two-week pilot scheme that will allow long-time nemesis Google to place ads among its search results, a Faustian bargain driven by the increasingly aggressive overtures of Microsoft.

Under the terms of the deal, some 3% of Yahoo's search results will be accompanied by ads placed by Google, although the company has already stated this does not indicate that "any further commercial relationship with Google will result".

Microsoft's ceo, Steve Ballmer, recently issued a three week deadline for Yahoo to accept its $44.6bn (€28.2bn; £22.6bn) approach, or else risk a decrease in the offer price.

Speaking about Yahoo's agreement with Google, Microsoft's general counsel Brad Smith said: "Any definitive agreement between Yahoo and Google would consolidate over 90% of the search advertising market in Google's hands. This would make the market far less competitive."

Some observers see Yahoo's latest move as an attempt to force Microsoft into increasing its offer price, although the ailing online pioneer is also reported to be trying to secure a 20% cash investment from AOL – owned by Time Warner – to launch a share buyback programme.

Microsoft is also negotiating with NewsCorp – which has previously held talks with Yahoo – about joining forces to buy the search giant, to beef-up their respective MSN and MySpace domains.

Data sourced from BBC Online (UK); additional content by WARC staff