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4/9/2008
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Yahoo To Carry Google's Web Search Ads

Officials say the test does not mean Yahoo will join Google's ad network or that "any further commercial relationship with Google will result."

Yahoo, which is battling a takeover attempt from Microsoft, said Wednesday it would temporarily carry Web search advertising from Microsoft rival Google.

Yahoo said in a statement that it would run the ads as part of a test that would only last up to a couple of weeks and would be limited to no more than 3% of Yahoo's search queries.

Ads from Google advertisers would be displayed alongside Yahoo search results only to queries from Yahoo.com in the United States. The ads would not run alongside results delivered through Yahoo's extended partner network.

In announcing the test, Yahoo made no mention of Microsoft's $42.2 billion takeover bid. Instead, the portal said the company's board "is exploring strategic alternatives to maximize stockholder value, including exploration of potential commercial business arrangements."

Furthermore, the test does not mean Yahoo will join Google's ad network or that "any further commercial relationship with Google will result."

Despite not mentioning Microsoft, Yahoo likely had the software maker in mind when it met with Google. "This is a way of reminding Microsoft that it [Yahoo] is still an independent company, and it still can do these types of deals," Michael Gartenberg, analyst for Jupiter Research, told InformationWeek.

Yahoo's motives for the test are unclear, but the company could be trying to show investors that it has alternatives to boost profits, and ultimately its stock price, other than a Microsoft takeover. On the other hand, the company could be using the test to prod Microsoft into sweetening its offer. Yahoo has said repeatedly that Microsoft's offer of $31 a share is too low.

Yahoo and Microsoft have recently blamed each other for holding up negotiations of a possible merger. In a letter to Microsoft chief executive Steve Ballmer, Yahoo executives on Monday said Ballmer needed to show some flexibility for merger talks to continue.

The letter followed Ballmer's complaint that meetings between the companies have not led to meaningful discussions. As a result, Ballmer said Microsoft would seek to replace Yahoo's board through a hostile proxy contest if the deal isn't accepted within three weeks.

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