Yahoo! strikes search ad deal with Google

Yahoo! has reached an agreement with Google that will up its ability to compete in the search and display marketplace. Yahoo will run Google search ads alongside Yahoo search ads on select pages from the company’s network of sites. Specifically, the agreement will enable Yahoo! to run ads supplied by Google's AdSense for Search and AdSense for Content services next to Yahoo!’s internally generated paid search and algorithmic search results. 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.

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 regular, algorithmic search. The agreement also applies to current partners in Yahoo’s publisher network.

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 capitalize 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.”

Yahoo! believes that this agreement will enable it to better monetize Yahoo!’s search inventory. At current monetization rates, this is an approximately $800 million annual revenue opportunity. In the first 12 months following implementation, Yahoo! expects the agreement to generate an estimated $250 million to $450 million in incremental operating cash flow.

Although Google and Yahoo! are not required to receive regulatory approval of the deal before implementing it, the companies have voluntarily agreed to delay implementation for up to three and a half months while DOJ reviews the arrangement.

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