Yahoo and Google pull advertising shock

 

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By Stuart Turton

Posted on 10 Apr 2008 at 10:33

Yahoo and Google have sprung a surprise by announcing that they are to share advertising space.

The "pilot" will last for two weeks and see Google place advertising alongside 3% of Yahoo's search results.

Analysts are suggesting that the move is Yahoo's attempt to show Microsoft it still has other options, and persuade the software giant to increase its $44.6 billion bid. For Google's part, it seems a clear attempt to frustrate Microsoft.

Microsoft has unsurprisingly criticised the deal: "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," says Brad Smith, Microsoft's general counsel.

But Yahoo claims that the trial period doesn't necessarily mean "any further commercial relationship with Google will result".

The surprising move comes as reports suggest Microsoft is considering tying up with News Corp, owner of MySpace, to acquire the company. In response Yahoo is thought to be continuing its "on again-off again" pursuit of AOL.

Earlier in the week Steve Ballmer gave Yahoo's executives three weeks to respond to its buyout offer before taking it directly to the board, a threat Yahoo subsequently called "unproductive" and one of its major shareholders described as a "blunder".