Yahoo to test delivering some Google search ads

Test limited; Microsoft says plan raises antitrust issues

Yahoo Inc. said today that it is beginning a test to deliver relevant Web advertising from Google Inc. alongside its own search results.

Yahoo said it will begin a limited test of Google AdSense for Search service. The test, which is expected to last up to two weeks, will apply only to traffic from in the U.S. The test will not include Yahoo's network of affiliate or premium publisher partners. It will be limited to no more than 3% of Yahoo search queries, the company said in a statement.

"As previously announced, Yahoo's board of directors is exploring strategic alternatives to maximize stockholder value, including exploration of potential commercial business arrangements," Yahoo said.

However, Yahoo said the test does not mean that the company will join the AdSense for Search program or that there will be any further commercial relationship with Google. Yahoo declined to comment further on any potential partnership with Google.

Google spokesman Daniel Rubin, in a statement, affirmed Yahoo's announcement. "Yahoo will be testing Google's AdSense for Search service, which will deliver relevant ads alongside Yahoo's own natural search results," Rubin said. "This is only a limited test and does not necessarily mean that Yahoo will join the AdSense program."

Microsoft Corp., however, which has been pursuing Yahoo as a takeover target since February, criticized the test, saying it raises potential antitrust issues.

"Any definitive agreement between Yahoo and Google would consolidate over 90% of the search advertising market in Google's hands," said Brad Smith, Microsoft's general counsel, in a statement. "This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo. We will assess closely all of our options. Our proposal remains the only alternative put forward that offers Yahoo shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers."

The takeover effort has been steadily growing more hostile. On Saturday, Microsoft CEO Steve Ballmer said Yahoo has three weeks to accept its $42 billion takeover offer or it would face a battle to replace its board and possibly a lower offer. Yahoo responded that it was open to considering an offer but claimed that Microsoft continued to undervalue the company.

Separately today, a major Yahoo shareholder said it is ready to back Yahoo in its attempts to remain independent if Microsoft lowers its buyout offer, The Wall Street Journal reported.

The Journal interviewed Bill Miller, portfolio manager at Legg Mason, who said, "The problem is Microsoft blundered with the letter this weekend. Telling the shareholders you're going to take something away from them is not a way to get their support."

Neither Yahoo nor Microsoft responded to requests for comment regarding this issue.

Copyright © 2008 IDG Communications, Inc.

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