Breaking: Yahoo and Google Announce Agreement

A couple hours later than expected, Yahoo and Google have finally announced a non-exclusive advertising agreement.

Yahoo began a small test of Google advertising in April and was quickly impressed with the results—but then they left us hanging, waiting for an announcement for nearly two months.

Yahoo’s press release reassures us that they’re not abandoning the Panama paid search platform:

The agreement enables Yahoo! to run ads supplied by Google alongside Yahoo!’s search results and on some of its web properties in the United States and Canada. The agreement is non-exclusive, giving Yahoo! the ability to display paid search results from Google, other third parties, and Yahoo!’s own Panama marketplace.

Under the terms of the agreement, 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. The agreement applies to paid search and content match and does not apply to algorithmic search. The agreement also applies to current partners in Yahoo’s publisher network.

Yahoo emphasizes the benefits to users and advertisers, the &c., but also highlights the primary motivation driving the deal:

At current monetization rates, this is an approximately $800 million annual revenue opportunity. In the first 12 months following implementation, Yahoo! expects the agreement to generate an estimated $250 million to $450 million in incremental operating cash flow.

Hm… Not quite $44.6B, but not too bad.

Google’s press release also emphasizes that Google and Yahoo will work on integrating their instant messaging clients.

Andy adds: Here’s what stood out to me…

• Yahoo will select which keywords and content will display Google paid search results.
• Yahoo expects to see an additional $250 million to $450 million in revenue over the next 12 months.
• If Yahoo gets acquired in the next 24 months, and the deal is terminated, it will pay Google $250 million, less any revenues earned by Google.
• Yahoo and Google have agreed to make sure their instant messenger technology is interoperable.
• The deal will not close for 3 and a half months, to allow for any DOJ review.