A poke in the eye for Microsoft.

If you’ve been following events at Yahoo you’ll know that the no.2 search engine has been testing google ads served up with Yahoo search results. Well, the testing finished sometime ago. Yahoo was also involved in a an acquistion dance with Microsoft. As you can see, this fell apart.

Now come the latest announcement: Yahoo will have the option of serving Google ads. The contextual ads will only appear alongside search results for Yahoo’s American and Canadian sites. I don’t think it will take long for this to extend to other countries.

Interestingly, this agreement is not exclusive meaning Yahoo can enter into similar arrangements with other contextual ad services.

This news is great news for Google. Some readers might see this as a slap in the face for Yahoo. Not so. Yahoo generates the majority of revenue from direct advertising. By farming off ad results this gives them more room to concentrate on their core business.

Could we see a future tie-up between Google and Yahoo? It’s and interesting prospect.

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