Yahoo! Ads On Google

Yahoo! which is in a heated battle against a takeover attempt from Microsoft, said Wednesday it would host search advertising from Google, one of Microsoft's many rivals. This test-drive, expecting to last for two weeks, could show whether Yahoo! can raise more funds counter balancing its already tanking revenue by outsourcing a key part of its business to Google.

Yahoo! released a statement claiming that it would run ads as part of an experiment that would only last up to a couple weeks and would be limited to no more than 3 percent of their searches. "This is only a limited test and does not necessarily mean that Yahoo! will join the AdSense program." As with most deals like this, Yahoo! would receive the majority of the money from the ads and Google would keep the rest. This would also allow them to make significant job cuts to their search-advertising team, saving them a lot of money, say analysts.

The competition with Google in search-based advertising is the sole reason Microsoft wants to acquire Yahoo!. Microsoft said last Saturday that if Yahoo! did not agree to their offer in three weeks, they would attempt to overturn the board of directors and replace them with those who would vote in favor. They also threatened to lower their offer for the company. Yahoo!'s reasons for resistance are uncertain. The company could be trying to show investors that it has found alternative ways to raise their profits, and ultimately its stock price, without being bought out by Microsoft. Yahoo! has said repeatedly that Microsoft's generous offer of $31 a share is below what they would like to see.

Analysts at Citigroup have calculated Yahoo! could boost its annual cashflow by 25% by outsourcing the sale of search ads to Google, because Google has more efficient technology and an agreement would allow Yahoo! to cut its own investment in this area. But a tie-up would give Google control of more than 90% of all the advertising sold next to search engine results, putting the deal at risk of being blocked by regulators.

In the end, Google once again comes out on top. They lead the market and the industry, and continue to improve their search capabilities. The company is growing at an exponential rate and their stock has proven that it can weather any storm that blows its way.

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