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11 April 2008Google and Yahoo to Share Web Advertisements
Yahoo and Google, the world's two biggest search engines, have announced a two-week experiment that will see them share advertising space.
The pilot will allow search engine giant Google, to place ads alongside 3% of the search results on Yahoo's website.
Analysts say that the move is designed to frustrate Microsoft, which has offered to buy Yahoo for $44.6bn (€28.2bn), or extract a higher offer. The news came as both sides were reported to be forging other alliances.
According to the New York Times, one of those alliances involves Microsoft and News Corp discussing a joint bid for Yahoo. The idea behind the alliance would be to combine three of the world's most visited websites: MySpace, Yahoo and MSN.com.
News Corp had previously discussed working with Yahoo to see off Microsoft's offer and at the same time, according to the Wall Street Journal, Yahoo is looking to Time Warner's AOL to keep out of Microsoft's hands.
It reported that the deal would involve Time Warner making a cash investment for 20% of the merged firm, which Yahoo could then use to buy back shares.
Microsoft criticised Yahoo's advertising trial with Google, saying any lasting deal would not be in the consumers' interests.
Brad Smith, Microsoft's General Counsel stated 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."
But Yahoo said the testing did not necessarily mean that any further commercial relationship with Google will result, which saw investors reacting positively to the announcement, with Yahoo shares rising 7%.
Cowen and Co analyst, Jim Friedland stated in an interview that "Yahoo has made a really clever move here. It looked like Microsoft had all the cards, Yahoo is at least now able to use this for leverage to get Microsoft to pay more".
Microsoft chief executive Steve Ballmer on Saturday gave Yahoo three weeks to agree to the company's offer or risk having the offer lowered.
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