Keep 4 U

My, my, how the tables have turned. After a pseudo-courtship which lasted the better half of this year, Yahoo! spurned Microsoft’s $40-something billion bid for acquisition and just last Thursday, officially signed a paid search contract with top search company, Google.

Many sources and analysts believe Microsoft was looking for a bond with Yahoo! so that the two could tag-team Google. Google has long been the toughest competition in the search industry as well as in online advertising. But rather than join forces with Microsoft, Yahoo! chose instead to sleep in the lion’s den… well, at least in Microsoft’s eyes.

Yahoo! disclosed information on the recent deal in a press release found here, while Google posted on the event in an official blog post.

Now, I don’t want to overwhelm (bore) you with an abundance of text, so let’s make this a two-parter. After all, there’s two sides to every story, right? This one will be all about Yahoo!’s take on the deal. You can find coverage on Google’s post here.

The title of Yahoo!s press release is rather succinct: “Yahoo! to Strengthen Competitive Position in Online Advertising Through Non-Exclusive Agreement With Google.” If that’s not “to-the-point” then I don’t know what is. But for fun, let’s dive into the meat of the press release and get the Yahoo! two cents on this paramount deal.

Right off the bat, Yahoo! affirms the deal will “enhance its ability to compete in the converging search and display marketplace” with the supplementary, underlying goal of improving the company’s “open strategy.”

The terms of the agreement indicate that Yahoo! will be permitted to host Google-generated ads on Yahoo! SERPs (search engine result pages); although Yahoo! is a global company, this activity is currently limited to the United States and Canada. Because the agreement is non-exclusive, Yahoo! will have the option to host ads on its SERPs from third party advertisers as well as from its own ad marketplace, Panama.

Among other specifics, the terms of the agreement include the following (taken directly from the press release):

* Yahoo! will select the search term queries for which - and the pages on which - Yahoo! may offer Google paid search results.
* Yahoo! will define its users’ experience and will determine the number and placement of the results provided by Google and the mix of paid results provided by Panama, Google or other providers.
* Applies to paid search and content match and does not apply to algorithmic search.
* Applies to current partners in Yahoo’s publisher network.

Yahoo! CEO and co-founder Jerry Yang commented on the deal, indicating that it “represents an important next step in [Yahoo!s] open strategy, building on the progress [Yahoo! has] already made in advancing a more open marketplace.”

As far as the future is concerned, Yahoo! is confident this new deal will “grow operating cash flow significantly;” the company is hoping to see an increase in operating cash flow from anywhere between $250 – 450 million within the year as a result of its interaction with Google.

Lastly, Yahoo! expressed its assurance that the terms of the deal were flexible enough to “continue to invest in ongoing initiatives such as algorithmic search innovation and search and display advertising platforms.”

Once again, I invite you to check out the Yahoo! press release for more information, as well as my Part II piece on Google’s side to the story.