Search Engine Optimization News Blog

Rumors of a Google / Yahoo collaboration have been in the works since before Microsoft threw its hat in the ring to acquire Yahoo in February of this year. With the reported withdrawal of that offer, online analysts are speculating about Yahoo’s next move.

Yahoo ran a two week test utilizing Google’s AdSense in April, but declined to comment on the results other than that the test was ‘successful’. Simply running the test has sparked furious controversy; the higher revenue per click from Google’s superior ad technology may bring in more immediate income for Yahoo but investors fear what the alliance may mean for Yahoo in the long run.

Google’s acquisition of DoubleClick in 2007 (beating out another bid by Microsoft for the same) further secured their claim to the top ranking spot both for search market share and generated per search ad revenue.

Yahoo had been lagging behind Google for some time as the competitive powerhouse surged ahead in cornering the lucrative ad market, and some see this move by Yahoo as admission of defeat in the battle for coveted advertising dollars.

If Yahoo were to outsource search to Google, nearly 90% of the search advertising market would presumably be in Google’s hands, prompting raised eyebrows by the antitrust commission, some say.

Yahoo is still the number one web traffic company in the world, but Google brings in twice the ad revenue, and Yahoo has apparently been considering outsourcing at least the European market for quite some time. The test run in April, however, applied only to traffic in the U.S. and was reputedly limited to no more than 3 % of Yahoo search queries.

Google makes more than 9 cents per click on its search ads, compared to less than 4 cents made by Yahoo, so sharing in the revenue by outsourcing completely could increase Yahoo’s profit for the year by over $500 million.

Several analysts worry that short term benefits may give way to long term disadvantages as Yahoo gives ground to Google. Some state the possibility that Yahoo is entertaining the idea simply in order to justify to its shareholders the decision to turn down the Microsoft deal earlier this week.

Meanwhile, the Redmond, Wash company claimed that the outsourcing possibility was a major reason for withdrawing their offer late Saturday, and that any alliance between Yahoo and Google would depreciate Yahoo’s value to MSN.

The Department of Justice is said to be investigating the legality of any partnership between the #1 and #2 ranked search ad companies, but sources at both companies state that they have kept the relevant antitrust authorities fully apprised since the beginning of negotiations.

Rumors continue to fly concerning the three leading web giants, and the days to come may hold startling announcements. Keep watching our posts as we keep you up to date on all the latest news!