Yahoo agrees Google deal and snubs Microsoft

A joint advertising and online search deal has been reached between Yahoo and Google after Yahoo rejected a Microsoft proposal to buy its online search business.

Initially, the agreement will last for 3 years but could last up to 10 years if Yahoo decides to renew.

The partnership, which is worth up to $800 million (£410 million) in additional revenue every year, will see the two companies ads appear alongside some Yahoo search results in the US and Canada.

Commenting on the deal, Eric Schmidt, Google’s chairman and chief executive, said this commercial agreement provides Yahoo with the opportunity to deliver more relevant ads to users and provide advertisers and publishers with better advertising technology.

Jerry Yang, Yahoo’s chief executive, said we believe that the convergence of search and display is the next major development in online advertising industry.

The transaction is not subject to regulatory approval, however, Google said it will postpone implementation by up to 3½ months to give the US Department of Justice a chance to review it.

According to a report by the BBC, it is likely that the deal will attract attention from competition regulators in Washington as alarm bells were already ringing on Capitol Hill over Yahoo’s ‘limited’ trial in April of Google’s technology.

Yahoo and Microsoft have confirmed that all discussions between them have ceased. A deal had been discussed between the two that would have seen Microsoft acquire the whole of Yahoo, or take a minority, passive stake and acquire the group’s search engine.

In a statement, Yahoo said that after careful consideration, it had rejected selling itself in its entirety or just its online search engine to Microsoft, as it would not be in the best interests of shareholders.

Microsoft recently announced that its live search is to become the default search engine on all PCs sold in the US and Canada by Hewlett-Packard, from next January.

Under the deal, Microsoft hopes its sponsored links will attract more users. Microsoft’s search engine is currently third after Google and Yahoo.

Story link: Yahoo agrees Google deal and snubs Microsoft