Google Adsense Advertising on Yahoo! Search

In a new deal, Google has given Yahoo! the access to use Google’s Adsense search and contextual advertising technology and now Yahoo! will display Google ads alongside its own natural search results in the U.S. and Canada.

Yahoo! can also serve contextually targeted ads on its U.S. and Canadian web properties as well as on its current publisher partner sites, though Yahoo will continue to operate its own search engine, web properties and advertising services. Yahoo! and Google also agreed to enable interoperability between their instant messaging services which will bring broader communication to users.

The Yahoo Press release says its very beneficial

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 $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. The agreement will 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.

Jerry Yang, Yahoo CEO says this deal is good for competition.

It may seem counterintuitive that doing a deal with a competitor would improve our competitive position. But as search and display continue their convergence, it puts Yahoo! in a better position to innovate and compete aggressively with Google and others for ad dollars. It also offers advertisers more choice and publishers gain better distribution and monetization to grow their business.

The official Google blog clarifies that

- This is not a merger
- This does not remove a competitor from the playing field.
- This does not prevent Yahoo! from making similar arrangements with others.
- This does not increase Google’s share of search traffic.
- This does not let Google raise prices for advertisers.

Earlier Microsoft failed to buy out Yahoo! and the battle of internet giants continues in the lucrative advertising space. Who will finally win… time will tell.