Sunnyvale, California-based Web pioneer Yahoo announced Thursday that it had signed a long-term search  advertising agreement with Internet giant Google, and that it had rejected a proposal from Microsoft, announcements that combined to essentially signal an end to the software giant's 18-week pursuit of Yahoo. A Pact That Could Last A Decade With Extensions Yahoo's agreement with Google, which could extend as long as a decade should all renewals take place, will allow the top search engine Google to provide ads alongside search results from the second most popular search engine Yahoo and on some of its United States and Canada Web properties, the companies announced Thursday. Separate statements issued Thursday from Microsoft and Yahoo made it clear that the two firms had abandoned efforts to forge even a more limited partnership, as the world's largest software maker told Yahoo that is was no longer interested in seeking a takeover. The nonexclusive search advertising deal will place ads from Yahoo and Google in online auctions that other firms are open to take part in - a measure put in place to try to help gain the approval of both U.S. and European Union antitrust regulators, who are seen as likely to seek review of the partnership announced Thursday. Google said that although the partnership with Yahoo did not require the approval of regulators, it had decided to delay implementation of the plan by up to three and a half months in order to allow the U.S. Department of Justice time to take it into consideration for review. Yahoo Could See Annual Influx Of $800 Million The chairman of the U.S. Senate antitrust subcommittee, Wisconsin Senator Herb Kohl, said on Thursday that his committee intends to closely examine Yahoo's partnership with Google. Yahoo said that the agreement with Google would lift the firm's  operating cash flow some $250 million to $450 million during the first year, and that it would bring the opportunity to add $800 million in annual revenue to the Sunnyvale company. Google chairman and chief executive Eric Schmidt said that the decision to place search ads won in the highest bidder auctions would not be up to his firm, but would instead be controlled by Yahoo. "The decision of showing ads is a Yahoo decision, not a Google decision," Schmidt said in a recent Reuters report. The partnership with Yahoo was expected to further cement Google's dominance over the flourishing search advertising business, and was likely a sign that the hostile takeover attempt mounted by Microsoft chief executive Steven Ballmer had backfired. "This commercial agreement provides Yahoo with the opportunity to deliver more relevant ads to users and provide advertisers and publishers with better advertising technology," Schmidt said Thursday. Yahoo To Control Number And Placement Of Search Ads The plan will give Yahoo the ability to choose which search terms Google will be able to supply ads for, and to set the number and placement of all ads sold by Google, which it will be able to combine with ads that Yahoo sells independently of the deal. Yahoo chief executive and co-founder Jerry Yang called the plan a method for "backfilling" ads. "We think of it as backfilling with Google monetization, rather than outsourcing," Yang said in an interview with The New York Times. Both companies said they were considering plans to expand the partnership announced Thursday. Under terms of the agreement, either Yahoo or Google can cease the search advertising partnership if a change of control - such as an acquisition - were to occur. Were such an event to take place during the next two years, the agreement would call for Yahoo to pay a $250 million termination fee, with credit for certain revenue the partnership with Google had already brought in. The partnership agreement was set to expire after four years, with an option to draw it out up to a decade with two extension terms of three years each, Yahoo said. Carl Icahn And Microsoft's Final Offer Billionaire investor Carl Icahn has said that Yahoo's board of directors made a flawed move when it refused Microsoft's takeover bid valued at $47.5 billion at the time, because it was detrimental to maximizing  financial gains for Yahoo shareholders. On Thursday Icahn said that he was studying the latest developments involving Yahoo, Google and Microsoft, according to a report in the Wall Street Journal, however he offered no further comment. Icahn has said that a deal with Google would be the second best option for Yahoo were it not able to forge a deal with Microsoft. Microsoft meanwhile issued a statement that its offer to purchase Yahoo's search business was still on the table. Recent talks between Microsoft and Yahoo had seen the Redmond firm ready to offer $35 per share for Yahoo stock, an additional $7.73 billion - or 16 percent - from its initial offer, according to Journal reports citing unnamed people familiar with the most recent talks. Yahoo rebuffed the Microsoft proposal, which had called for Ballmer's firm to acquire a minority stake in Yahoo, its search property, and the establishment of a revenue-sharing pact. With the rejection of Microsoft's latest offer, Yang said it was time to move forward. "Clearly it is time to move on," Yang said during a conference call. "This agreement with Google helps us to do so," Yang added. To some industry observers, writing Friday on the online discussion forums operated by WebmasterWorld, a community of mostly tech-savvy webmasters and search engine marketing (SEM) professionals founded by chief executive Brett Tabke, the announcement of Yahoo's search advertising partnership with Google raised questions. "As someone who advertises on both Yahoo Search Marketing and Google AdWords, I really want to know how this affects me," said a member using the handle "MediaSpree." Yahoo Signs Advertising Deal With Google As Microsoft Talks Fail Others expressed a guarded optimism that the partnership could help improve the search engine marketing campaigns of those who deal with both Yahoo and Google. "I use both and have been at the point of dropping Yahoo for the last six months," wrote another WebmasterWorld member who used the handle "Tropical Island." "This will make my decision a lot easier. The quality of Yahoo PPC [Pay Per Click] has deteriorated to such an extent that the low volumes on Yahoo no longer justify the work involved to run separate campaigns. When my deposits run out I will drop Yahoo," the member added. Those sentiments were shared by a member using the handle "Adam7288." "I think Yahoo's system is flaky at best. Replacing any of it with Google ads is only a good thing for me," the WebmasterWorld member added. Yahoo said that it saw the partnership with Google as a step towards combining search and display ads. "We believe that the convergence of search and display is the next major development," said Yang. Related Links:
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10:35 pm on June 13, 2008 (utc 0)