If you can’t beat them, join them

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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?