Yahoo! to post Google ads on Yahoo!

Take that, Ballmer

Microhoo The next time you search Yahoo!, you may see a Google ad. And Steve Ballmer isn't too happy about it.

This afternoon, the world's second largest search engine announced that at some unspecified moment, it will begin a test of Google's AdSense for Search service. This will post Google-brokered ads alongside Yahoo! search results.

The test will last for no more than two weeks, and it will affect no more than three per cent of all Yahoo! search queries - all in the US. It will not affect Yahoo!'s affiliate sites - only yahoo.com.

According to Wall Street Journal - which leaked the story earlier today - this is part of an effort to "boost Yahoo's leverage in its ongoing takeover standoff with Microsoft". And The Journal's take was echoed by a subsequent Yahoo!'s press release - though the release didn't mention the Redmond software giant by name.

"As previously announced, Yahoo!'s board of directors is exploring strategic alternatives to maximize stockholder value, including exploration of potential commercial business arrangements," the press release reads. "The Company noted that 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."

On February 1, Microsoft bid $44.6bn for Yahoo!, and on Monday, Steve Ballmer and company threatened a proxy fight if Yahoo! doesn't succumb within three weeks.

Yahoo! said it will not provide further comment on its Google AdSense test. But you could view this as an indictment of the company's Panama search advertising engine. Introduced just last year, Panama was meant to mimic The Google Way. But it hasn't, delivering significantly fewer dollars per search query.

Even before Microsoft entered the picture, according to The Journal's sources, Yahoo! was negotiating with Google over search advertising in Europe.

Of course, Yahoo!'s main objective is to thumb its nose at Microsoft.

Google has questioned whether a Microsoft-Yahoo! marriage would hamper market competition. But a partnership between Yahoo! and Google would raise similar questions - as Microsoft pointed out in a statement just released to the web:

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, in sharp contrast to our own proposal to acquire Yahoo! We will assess closely all of our options. Our proposal remains the only alternative put forward that offers Yahoo! shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers.

So we're well on our way to one of those Google-Microsoft spats where each accuses the other of inappropriate behavior. ®

Microsoft's bid for Yahoo! - the story so far