|
It seems that Yahoo wasn't bluffing when it said that it had plans for an ad deal with internet search giant Google. According to the deal Google would supply text ads to Yahoo, which would be displayed next to Yahoo's search results. Yahoo has also conducted a limited test of the same for two weeks, in April. But, it is still unclear as to how this partnership will see the light of day, considering that Microsoft has walked away from its Yahoo acquisition offer.
However, there are two sides to it. On one hand, because Microsoft backed off from the deal, it has given Yahoo more flexibility to lay down its own path. On the other hand, since Microsoft had attempted to acquire Yahoo, it has raised the expectations of the shareholders as to where the prices of the shares should be. Meanwhile, Mark Mahaney, Citigroup's analyst estimated that Yahoo makes less than 4 cent per click whereas Google makes more than 9 cent. What this basically means is if Yahoo and Google can share their resources, it will help Yahoo generate more cash while Google will be able to deliver more ads.
But partnership between the number one and number two search-ad companies can also lead to some trust issues. Yahoo already has a plan in place to solve this kind of anti-trust issues. It plans to solve this by offering a system which will be open whereby others besides Google could offer their ads. Moreover, the bidding system in place for the ads will be a dynamic one placing those ads that would generate the highest amount of revenue. However, it is still not known whether Yahoo has asked Microsoft to participate or not. When asked, Yahoo declined to say anything regarding the matter.
It is known that in a letter to Yahoo Chief Executive Jerry Yang, Ballmer, Chief Executive of Microsoft has criticized the Google ad deal as the main reason why the company did not want to make a bid to Yahoo. He said that the discussions with Yahoo have led to the conclusion that these steps would make Yahoo undesirable as an acquisition for Microsoft. He further added that if this deal is fulfilled, it will sabotage the ad system of Yahoo making retaining employees harder. This, in turn will increase Google's power in search ads even more.
