Yahoo and Google test search in ad pact

Yahoo is surrendering some of its advertising space to Internet search leader Google in an unusual test that appears designed to frustrate Yahoo's unsolicited suitor, Microsoft, according to an Associated Press report.

The two-week experiment will allow Google to show ads tied to about 3% of the queries made in the US through Yahoo's search engine, the Internet's second largest after Google's.

Yahoo will still use its own technology, acquired and developed at cost of more than US$2 billion (€1.1 billion), to place ads next to the other search results on its web site, the report said.

The company also will continue to distribute search ads to its own partners.

Together, Google and Yahoo control more than 80% of the US search market, making it highly unlikely that antitrust regulators would allow the Silicon Valley rivals to form a long-term advertising alliance, analysts said.

By flirting with Google, Yahoo is trying to signal it has other options besides succumbing to Microsoft, said Standard and Poor's equity analyst Scott Kessler, quoted in the report.

However, Kessler doubts that most investors will take the Google alternative seriously, given the antitrust obstacles. Investors weren't impressed by Yahoo's latest manoeuvre either.