Thursday, April 17, 2008

Yahoo And Google.

Yahoo is closer to outsourcing its core ad search business to Google, after favorable testing of Google's advertisements on its search pages, according to a report in The Wall Street Journal.

The WSJ cited people familiar with the matter who said that a deal between Yahoo and Google is increasingly likely given the status of the testing. The report also notes that such an outsourcing deal could give Yahoo a boost in its efforts to spur Microsoft into increasing its unsolicited buyout bid for the Internet search pioneer.

Yahoo may need such help if Microsoft is concerned about the additional costs it may have to bear to retain Yahoo employees.

A report in the New York Times noted "the hidden cost of 'flight insurance' against employee defections may also be a reason Microsoft has resisted raising its bid."

The Times report, citing sources, noted Microsoft not only paid $800 million to acquire Tellme Networks but spent an additional $100 million on employee retention perks--or an average of $300,000 per employees for the 330-member workforce.

Last week, Yahoo announced it would begin a limited test of using Google to deliver some search advertising. Microsoft immediately came back with a stern warning that such a partnership would hurt competition

The Internet search pioneer has run both a Microsoft buyout scenario and a Google outsourcing deal through its antitrust viewfinder, according to sources who spoke with CNET News.com.

Yahoo, meanwhile, has invested millions of dollars in its own search technology, called Panama, so a partnership with Google would be a serious departure from its previous efforts--though it would not necessarily mean that the Internet company is completely killing off its entire ad infrastructure.

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