Yahoo, Google Team Up in Online Advertising

Yahoo and Google are launching a small experiment in which ads selected and delivered by Google would appear on Yahoo searches. That would probably give Yahoo more cash, because Google generates more revenue per search query than Yahoo. The development is widely seen as an effort by Yahoo to avoid the buyout advances of Microsoft.

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STEVE INSKEEP, host:

We can't get enough of this Microsoft/Yahoo saga. There hasn't actually been a deal yet, but there's been plenty of news. Here's the latest. Newspapers are reporting that the Microsoft CEO, Steve Ballmer, may enlist News Corp's CEO, Rupert Murdoch in his bid to buy Yahoo. An alliance might allow Microsoft to increase its asking price, putting more pressure on Yahoo's shareholders to say yes. Executives at the Internet company still want to escape a takeover if they can, and they are talking with Time Warner's AOL.

Yesterday, Yahoo announced a test alliance with its rival Google. NPR's Wendy Kaufman has more on that.

WENDY KAUFMAN: The test is small, affecting no more than 3 percent of Yahoo search queries and lasting no more than two weeks. But it raises the specter of a bigger and broader partnership between Yahoo, which has one of the most visited sites on the Web, and Google, the clear leader in search and the ad revenue that goes with it.

Yahoo believes that by using ads selected and delivered by Google, it may be able to make more money from advertising. As analyst Derek Brown of the Wall Street firm Cantor Fitzgerald explains, searches done using Google generate more advertising revenue per query than searches done on Yahoo.

Mr. DEREK BROWN (Cantor Fitzgerald): The question that Yahoo hopes to answer through this is how much more revenue and thus profit can Yahoo generate by displaying Google ads than by displaying their own ads.

KAUFMAN: What happens after the test period is anyone's guess. Neither Google nor Yahoo would speculate. But Microsoft was quick to chime in. Within minutes of Yahoo's announcement yesterday, Microsoft issued a statement saying, quote, "Any definitive agreement between Yahoo and Google would consolidate over 90 percent of the search advertising market in Google's hands." The statement continued: "This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo." The battle over Yahoo's future continues.

Wendy Kaufman, NPR News.

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