Google, Yahoo make the deal: AdSense on Yahoo Search

By Scott M. Fulton, III, BetaNews

June 12, 2008, 6:54 PM

Late Thursday afternoon, the news came from Google that it will indeed become a full-time provider of AdSense advertising for Yahoo's search pages, and the two companies' IM protocols will become interoperable.

Under the deal, as Google's announcement today describes it, Yahoo will become a carrier of AdSense-driven contextual ads not only within its own search pages, but also optionally for other services that it hosts. But Yahoo will continue to provide the search functionality -- it is not sublicensing Google's search to substitute for its own, or making any kind of a deal that passes control of Yahoo Search over to Google.

In a corporate blog post this afternoon, Google Senior VP Omid Kordestani wrote, "We are proud of the advertising technologies we have built, which show users a relevant ad whether they are searching for a specific item or browsing the internet. This arrangement extends those benefits to Yahoo and its many users, advertisers and publisher partners. We currently provide similar services to sites like AOL and Ask.com as well as many other partners, and we work closely with all of our partners to ensure that our partnership drives their long term success."

Kordestani went on to make certain points very clear. In boldface type, he wrote, "This is not a merger." The deal is limited to enabling Google ads to appear on Yahoo search and Yahoo-hosted sites, as well as an agreement between both companies to make their instant messaging services interoperable.

Also with a boldface heading, he added, "This does not remove a competitor from the playing field. Yahoo will remain in the business of search and content advertising, which gives the company a continued incentive to keep improving and innovating. Even during this agreement, Yahoo can use our technology as much or as little as it chooses." He went on to say Google's share of search traffic will not increase under this deal -- a key concern of regulators -- since it's still Yahoo's engine that's providing the search for Yahoo's pages.

Speaking on behalf of her company this afternoon, Yahoo President Susan Decker wrote, "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. 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."

Yahoo's statement spelled out the terms of the deal: It will run for four years initially, with the option of extending it to ten years in two- or three-year renewal intervals. It only affects Yahoo Web properties in the US and Canada.

"Advertisers will continue to pay Yahoo directly for clicks served by Yahoo from Yahoo's Panama and Content Match marketplaces," today's Yahoo statement reads. "Advertisers will pay Google directly for each click on Google paid search results appearing on Yahoo owned and operated network or certain affiliate sites. Google will share a percentage of such revenue with Yahoo."

BetaNews tests Thursday afternoon did not immediately reveal Google AdSense-driven contextual ads along Yahoo search results just yet.