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Thursday, June 12, 2008
After much speculation, Google/Yahoo! announced a paid search deal with Google. In the new Panama interface, Google ads will run alongside Yahoo! ones. The deal also includes the Yahoo!’s contextual network. Among other things, Yahoo! is looking to Google for help to monetize underperforming inventory, namely, tail terms. Yahoo! has identified an $800 million opportunity to monetize such terms and according to Yahoo! the deal is expected to yield $250 million to $450 million in incremental operation cash flow.
With the deal, Yahoo! will be able to choose where Google ads will appear (for which keywords) as well as how many ads will appear per keyword. In the conference call Q&A, when asked if the agreement will cannibalize any aspect of Yahoo!’s current business, they stated there was room for such a deal and highlighted the positive results of the infamous Google/Yahoo test of April 2008. At this point, Yahoo! believes Google is better at monetizing tail keyword terms and they believe the deal is a win-win for all.
The deal is a non-exclusive agreement and is for a ten year period. The first renewal period is after four years with at least two more renewal periods in the remaining six years. The agreement is currently for the US and Canada only.
Posted by
Mona Elesseily
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