Yahoo! Inc. (NASDAQ: YHOO) made another in a series of decisions that have pushed its shares higher for months. It has formed an advertising deal with Google Inc. (NASDAQ: GOOG), which has a search engine market share nearly four times Yahoo!’s size. Under the agreement, Yahoo! said:
Source: courtesy of Google Inc.
Today, we’re excited to announce that we recently signed a global, non-exclusive agreement with Google to display ads on various Yahoo! properties and certain co-branded sites using Google’s AdSense for Content and Google’s AdMob services.
By adding Google to our list of world-class contextual ads partners, we’ll be able to expand our network, which means we can serve users with ads that are even more meaningful.
Microsoft Corp. (NASDAQ: MSFT) continues to have an advertising partnership with Yahoo!, which originally was meant to challenge Google’s prime spot among search advertising. The writing is on the wall, though. Microsoft will be on its own eventually, and the billions of dollars it has invested in its Bing search initiative and earlier incarnations will be significantly jeopardized. The strategy that Microsoft and Yahoo! together could challenge Google will be a memory.
The disclosure by Yahoo! is another example of how new management under CEO Marissa Ann Mayer has turned to a philosophy of realpolitik. Years of evidence show that Microsoft has done nothing to improve Yahoo!’s revenue from search, and may have undermined it. Google’s lead is so strong that a Yahoo! alliance with any other company cannot be anything other than a failure. Mayer’s shift is the only practical decision as she tries to improve Yahoo!s fortunes to the point where Wall St. sees a viable future of it as a standalone company.
At the conclusion of Yahoo!’s announcement, management said:
We look forward to working with all of our contextual ads partners to ensure we’re delivering the right ad to the right user at the right time.
Google is the only company that has made this kind of advertising highly profitable and, therefore, the only partner worth having.
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