It seems like Yahoo! may have finally given up trying to beat Google with the announcement that they are running a two week trial displaying Google AdSense listings alongside their search results in the US (more detail).  The initial trial will include the results displaying on no more than 3% of search queries submitted and will only be seen by Yahoo! US users.  Yahoo! claim the move is is part of an “exploration of strategic alternatives to maximise stockholder value”, i.e. make them more money.  Microsoft have already expressed their own concerns that should a future deal be struck this would take Google past the 90% market share mark and raise further competition concerns.

It concerns me what a future deal could mean for the search market as the it effectively means a consolidation of the market as opposed to the fragmentation we had seen coming over the past 2 years.  This simplifies the process and doesn’t necessarily bode too well for search marketing agencies.  From Yahoo’s perspective it may come down to purely monetary figures.  If they have decided that they are not going to get very far with challenging Google in the paid search market then displaying AdSense results would allow them to significantly reduce their staffing levels and technology costs.  Although it wont be nice for those people that end up getting the boot, the boardroom wont be concerned if the figures stack up.

It does make you wonder what sort of deal has been brokered for the trial and the possibilities beyond though.  A typical AdSense partner might be earning 40% of the click revenue generated but Yahoo! aren’t you standard partner! Could Google be willing to let Yahoo! keep all of the revenue for the sake of market share?

It looks like Microsoft might be refusing to take no for an answer in their bid to buy out Yahoo! in a bid worth $40Bn.  After having their bid rejecting because the Yahoo! board believed it significantly undervalued their brand and investment in technology Microsoft are rumoured to be responding by attempting to ignite a proxy fight to take over the company.  Such a proxy fight would see Microsoft nominate a group of directors sympathetic to a deal for shareholders to vote on at Yahoo’s annual meeting.   According to Morningstar this is Microsoft using the carrot and the stick approach, just both at the same time! The carrot of the share price, 62% above trading price, and the stick which comes in the form of the threat of a proxy battle.  The drama continues and maybe Microsoft will get their way after all!

The saga of who will buy/merge with Yahoo continues with the announcement they are in talks with AOL about a potential merger to take on the digital world.  It is difficult to see how two very similar operations could effectively pull together to take on the market as is pointed out by Mashable.  They are both a web portal offering search functionality, display advertising and personal email so what a merger would achieve is slightly confusing unless the both of them are willing to merge their systems for the greater good of taking on Google and Microsoft in their respective strong holds.  The only benefit I could see is if by merging their two media selling/buying operations they could aim to offer the advertiser greater reach through one point of call but this is a tenuous link at best.  Maybe they have something else up their sleeve whcih could surpries us all but for me there is little benefit in such a merger.