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Yahoo! Teams up With Google in an Attempt to Stay Afloat in the Online Search Space

Negotiations between Yahoo! and Microsoft lead to a Yahoo!-Google partnership. Yahoo! will now host Google’s ad share program within its own search engine and web portal.

The deal is non-exclusive, so Yahoo! will display its own paid search advertisements and those of other search engines next to Google’s ads. Yahoo! released a statement predicting an additional $800 million in ad revenue annually. Google and Yahoo! will share the revenue from the deal, which is estimated to generate an additional $250 million to $450 million in operating cash flow for Yahoo! within the first year. Google’s current reign over the search advertising market will also be strengthened, so both companies will benefit greatly from this deal.

The agreement will have many important implications for search. Bidding for Google keywords may become more competitive because the ads will be displayed on both search engines, ultimately resulting in driving more traffic. In fact, Google already has a similar agreement with AOL and Ask.com.

Yahoo! may become a bigger player in the search space. That, at least, is the goal for Yahoo!. The agreement will certainly bring Yahoo! a greater cash-flow and will likely help Yahoo! retain its current customer base. This could mean increased traffic and investment in Yahoo!-centric search. Additionally, Yahoo! will continue to use its own industry-leading banner ad platform.

Microsoft has already raised anti-trust concerns regarding the partnership. Yahoo! and Google are voluntarily delaying the implementation of the deal to allow the Justice Department time for review.  However, most Anti-trust analysts believe the deal will withstand regulatory scrutiny. Even the skeptics seem to indicate that Yahoo! may not be able to survive in the Internet search space without the deal which would definitely decrease competition.

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