Monday, 16 June 2008

Yahoo! Partners Google for Online Advertising

Yahoo and Google made headlines Thursday as they entered into an agreement that will see Yahoo run ads supplied by Google alongside its search results and on some of its web properties...

Yahoo and Google made headlines Thursday as they entered into an agreement that will see Yahoo run ads supplied by Google alongside its search results and on some of its web properties in the United States and Canada.

To evade the risk of regulatory backlash both Internet goliaths said the partnership will be non-exclusive, giving Yahoo! the ability to display paid search results from Google, other third parties, and Yahoo!'s own Panama marketplace.

According to Yahoo, this deal with Google will enhance its ability to compete in the converging search and display marketplace, advancing the company's open strategy.

Under the terms of the agreement, 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 algorithmic search. The agreement also applies to current partners in Yahoo's publisher network.

"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," said Yahoo CEO and co-founder Jerry Yang.

Yahoo believes that this agreement will enable the Company to better monetize Yahoo!'s search inventory in the United States and Canada. At current monetization rates, this is an approximately million annual revenue opportunity. In the first 12 months following implementation, Yahoo! expects the agreement to generate an estimated million to million in incremental operating cash flow.

The agreement aims to enhance Yahoo!'s ability to achieve its goal to grow operating cash flow significantly, while at the same time providing flexibility to continue to invest in ongoing initiatives such as algorithmic search innovation and search and display advertising platforms. It gives Yahoo! complete flexibility to continue to use its Panama paid search results.

"This agreement provides a source of funds to both deliver financial value to stockholders from search monetization and to invest in our broader strategy to transform display advertising and advance our starting point objectives with users," said Yahoo! President Sue Decker.

"It enhances competition by promoting our ability to compete in the marketplace where we are especially well positioned: in the convergence of search and display."

Users will also benefit from Yahoo!'s ability to invest incremental operating cash flow in ongoing improvements to its search services, building upon recent major innovations such as Search Assist and SearchMonkey.

Advertisers will continue to benefit from multiple marketplace alternatives including Panama, Google and others. Publishers will benefit from a combination of distribution, monetization and services to help them grow their businesses.

Earlier in the day Yahoo released a statement confirming that it has put a full stop to all talks about an alliance with Microsoft.