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Yahoo Enters into “10 Year” Paid Search Deal with Google


June 16, 2008


 

Yahoo! and Google reached the non-exclusive agreement that enables Yahoo! to run Google’s ads alongside Yahoo!'s search results as well as on some of its web properties in the United States and Canada.

Under the terms of the agreement, Yahoo! will select the search term queries for which it may desplay Google paid search results. Yahoo! will also determine the number and placement of the results provided by Google and the mix of paid results provided by Panama, Google or other providers.

The deal only applies to paid search and contextual ads, not to algorithmic search. The agreement also applies to current partners in Yahoo's publisher network.

Yahoo expects this deal to add $800 million a year in revenues and $250 million to $450 million in operating cash flow.

The term of the agreement is 10 years which include a 4-year initial term and two 3-year renewals at Yahoo!’s option.

Yahoo CEO Jerry Yang said that the two search companies didn't need regulatory approval for this deal because it's open and non-exclusive. at Google explains in the Google blog post why the agreement doesn't involve anti-trust considerations:

 

It is important to say what this agreement is not:

  • This is not a merger. Rather, we are merely providing access to our advertising technology to Yahoo! through our AdSense program.

  • This does not remove a competitor from the playing field. Yahoo! will remain in the business of search and content advertising, which gives the company a continued incentive to keep improving and innovating. Even during this agreement, Yahoo! can use our technology as much or as little as it chooses.

  • This does not prevent Yahoo! from making similar arrangements with others. This arrangement is not exclusive, meaning that Yahoo! could enter into similar arrangements with other companies.

  • This does not increase Google's share of search traffic. Yahoo! will continue to run its own search engine and advertising programs, and the agreement will not increase Google's share of search traffic.

  • This does not let Google raise prices for advertisers. Google does not set the prices manually for ads; rather, advertisers themselves determine prices through an ongoing competitive auction. We have found over years of research that an auction is by far the most efficient way to price search advertising and have no intention of changing that.

Started as an alternative to the Microsoft takeover bid, the two-week test in April, as expected, finally resulted in a real advertising agreement.


                



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