Yahoo To Test Google Ads

Yahoo said it plans to carry search advertising from Google as part of a test that could lead to a broader partnership reports the WSJ. The two-week trial, which will be limited to U.S. traffic and no more than 3% of Yahoo's Web search queries, is designed for the two sides to evaluate the revenue potential of a broader search ad outsourcing arrangement. Yahoo already had been in negotiations to outsource its Web-search advertising in Europe to Google since last year, say people familiar with the matter.

Citigroup Global Markets analyst Mark Mahaney estimates that Yahoo could boost its cash flow more than 25% annually by outsourcing all its search advertising to Google. Some investors have called for Yahoo to abandon its own search advertising system as a quick way to boost its revenue. Analysts predict that outsourcing its search ads to Google would boost Yahoo's cash flow, since Google's system generates significantly more revenue for each search query than Yahoo does. Under such an arrangement, Yahoo would likely garner a majority of the revenue and Google keep the rest as a commission.

In a press release, Yahoo said "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. " Yahoo CEO Jerry Yang has previously said "We believe having a principal position in both search and display advertising is critical to creating...long-term shareholder value".