Google and Yahoo strike ad deal

After months of speculation Yahoo has sealed a deal with Google which allows them to use Adsense on their search and content network; which could be worth $800 million in revenues to Yahoo over the next 12 months.

Just a few hours after showing Microsoft the door for the second time, the promiscuous search engine Yahoo has finally decided to settle down with Google.

After flaunting itself to Microsoft for a number of months, trying to squeeze more money out of the potential full/part buy-out for its shareholders, Yahoo canned the deal and signed up with Google.

The Google-Yahoo partnership affects the US and Canada, where Yahoo can use Adsense to show Google ads on some of its search engine results pages (SERPs) as well as on its content network.

The deal is set to last 4 years but if successful Yahoo has 2 three-year extensions available. The deal is also set to make the two online giants’ instant messaging software compatible.

According to Google’s official blog post on the matter this IS NOT a merger, and does not remove Yahoo as a competitor. Yahoo are still going to be running their own search engine, and are still going to be running Yahoo Search Marketing (YSM).

At the end of the day though, Yahoo will be generating revenue – and essentially more profit – for Google. The difference in click-through-rate from searches on Yahoo and searches on Google is substantial, so using Google’s ads should allow Yahoo to gain a much larger volume of clicks.

This deal says to me that Yahoo have no intention of improving their own search marketing system, and are quite happy to pay Google for use of a better one that will display more relevant ads and in theory generate more clicks (and more revenue).

Google also say on their blog that Yahoo are welcome to use their technology as little or as much as they like. So if it proves successful, will we see Yahoo join Google’s search network permanently? Could this be the beginning of end for YSM? I’m sure we’ll find out before the end of the 4 year deal.