Yahoo! in Search Ad Test With Google

NEW YORK In what could open a new front in its battle with Microsoft, Yahoo! said it would begin a test of running search ads supplied from longtime rival Google.
 
Yahoo! will test running Google search ads next to 3 percent of its U.S. search results over the next two weeks. The company could then evaluate whether it would stand to generate substantially more revenue using Google ads rather than those placed through its Panama ad sales system. Yahoo! will continue to use its own search technology
 
Outsourcing its search results to Google would amount to a stunning about-face for Yahoo!, which has battled Google tooth and nail in the search market since it bought its own algorithmic search technology and paid search system in Overture in 2003. It devoted considerable resources into overhauling its paid search platform last year, debuting Panama in October 2006.
 
Yet Yahoo! has been unable to match Google in the market. Its search share has continued to fall while Google's grows. The situation has set off a dynamic where Google is able to attract more searches, more advertisers and even higher price clicks.
 
Yahoo! has resisted suggestions it contract out search to Google on both antitrust grounds -- together they represent 80.8 percent of Internet searches, per ComScore -- and because it sells both display and search ads together. Yahoo! combined its brand and search advertising teams in June 2007.

The test comes as Yahoo! seeks alternatives to Microsoft's $42 billion takeover offer. Over the weekend, Microsoft set a three-week deadline for Yahoo! to begin negotiations, a demand Yahoo! rebuffed by restating its contention the offer undervalues the company.

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