Yahoo, Google Strike Advertising Deal

Just hours after announcing that talks with Microsoft had ended without a deal, Yahoo announced an advertising partnership with Google.

Under the agreement, Yahoo joins Google's AdSense program, using a platform that will display Google's ads along with search results on select, Yahoo North American Web pages. The nonexclusive agreement allows Sunnyvale, Calif.-based Yahoo to pursue other search partners. Yahoo can deliver ads of its own as well.

Yahoo said it expects this deal to earn the company between $250 million and $450 million in "incremental cash flow" during the first year.

"We believe that the convergence of search and display is the next major development in the evolution of the rapidly changing online advertising industry," Yahoo CEO Jerry Yang said in a prepared statement. "Our strategies are specifically designed to capitalize on this convergence -- and this agreement helps us move them forward in a significant way."

Google Senior Vice President Omid Kordestani said in a post on the company's Web site that the deal is "good for users, advertisers and publishers," and is also "good for competition."

"The truth is, this kind of arrangement is commonplace in many industries, and it doesn't foreclose robust competition," Kordestani commented. "Google and Yahoo will continue to be vigorous competitors, and that competition will help fuel innovation that is good for users."

The announcement was not unexpected. In April, Yahoo announced it would be conducting a limited test of AdSense. Also, several reports issued this afternoon predicted that Yahoo and Google would announce the partnership after the market closed.

In Yahoo's earlier announcement today, stating that its conversations with Microsoft had ended, the company said that it was not interested in Redmond's proposal to acquire only its search engine traffic. Such a deal "would leave the company without an independent search business." In response, Microsoft said it was still interested in pursuing Yahoo's search business.

At press time, Microsoft had not released any comment on the Yahoo/Google deal.

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Becky Nagel is a contributor to Application Development Trends. She is the editor of ADT's sister sites, and, and is co-editor of You can contact her at [email protected].