Yahoo! Hits Back at Microsoft With Google Test!

In the continuing game of cat and mouse between Yahoo! and Microsoft, Yahoo! appears to have made a very cleverly timed move. It has confirmed that it will be testing Google's paid search ads alongside its own for the next two weeks.

The test will however involve no more than 3% of Yahoo's search pages in the United States, leading to speculation that this isn't seen as a long term strategy.

The official statement from Yahoo! is below:

Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, announced today that it will begin a limited test of Google Inc.'s AdSense for Search service, which will deliver relevant Google ads alongside Yahoo!'s own search results. The test will apply only to traffic from yahoo.com in the U.S. and will not include Yahoo!'s extended network of affiliate or premium publisher partners. The test is expected to last up to two weeks and will be limited to no more than 3% of Yahoo! search queries.

As previously announced, Yahoo!'s board of directors is exploring strategic alternatives to maximize stockholder value, including exploration of potential commercial business arrangements. The Company noted that the testing does not necessarily mean that Yahoo! will join the AdSense for Search program or that any further commercial relationship with Google will result. The Company further stated that it would not comment on the nature or timing of any potential relationship.

According to the Wall Street Journal, the test is "designed for the two sides to evaluate the revenue potential of a broader search ad outsourcing arrangement. They have been discussing such an arrangement as part of Yahoo's pursuit of alternatives to Microsoft Corp.'s unsolicited acquisition offer, according to people familiar with the matter."

So just how does Microsoft feel about this new partnership?

Microsoft's General Counsel Brad Smith has said that "any definitive agreement between Yahoo! and Google would consolidate over 90% of the search advertising market in Google's hands. This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo! We will assess closely all of our options. Our proposal remains the only alternative put forward that offers Yahoo! shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers."

This is a very interesting move from Yahoo! who only last week received a letter from Microsoft CEO Steve Ballmer giving a deadline to the proposed merger. It would appear that Microsoft doesn't necessarily hold the ace card in this deal and may have good reason to be feeling a little worried.

Feel free to let us know if your Google ads have been showing up Yahoo! search results.

Posted by Courtney Mills at 5:50 AM GMT