Google to Feed its Ads to Yahoo Searches

Two of the biggest tech rivals are now forming an interesting alliance. Following a profit miss in the third quarter, Yahoo has announced a new agreement with Google under which it will display Google ads in its search results while continuing with its own ads and those from Bing. The agreement is set to last three years and includes both mobile and desktop.

Interestingly, Google is the former workplace of current Yahoo CEO Marissa Mayer, where she served as a usability leader and spokesperson.

The deal underway with Google is much like the current one with Microsoft. Yahoo will deliver the traffic with its search engine and share in the revenue from Adwords.

This new non-exclusive agreement is being crafted to meet the best interests of both companies. Yahoo will benefit from using Google’s more sophisticated search advertising service while preserving its autonomy to work with any other search advertising service it wants, be it Microsoft or a third party. Yahoo won’t be obligated to send Google any minimum number of queries, and it retains sole discretion to decide which queries to send.

Meanwhile, Google will increase its earnings by reaching a search demographic it wouldn’t otherwise. Advertisers will flock to Adwords in greater numbers once they see it can help them reach users on both search engines. The percentage of earnings Google will make will depend on whether the ads are displayed on mobile, desktop, in the US, or outside the US.

This is a smart move for Yahoo. Although in Yahoo’s ideal world they would own their entire search experience, the reality is that they’re not going to be taking Google’s place anytime soon. Mayer and other Yahoo higher-ups know this, and instead of fighting it, they are embracing it. They’re finding a way to make money off the superiority of their competitor’s search product.

Nevertheless, Yahoo doesn’t want to let itself get left behind in the search advertising race. Mobile is still a viable battleground which none of the major search engines–including Google–have been able to fully conquer. This provides Yahoo with ample opportunity, especially given the fact that mobile searches have now surpassed desktop searches. Its native ad program, known as Yahoo Streaming, is designed to appeal to a broader base of advertisers across the economic spectrum.

Then there’s non-browser advertising. When 90 percent of the time people spend on their smartphones is in apps–not the browser–the company that best learns how to reach audiences through this medium is going to come out winning. Google has the clear advantage in this realm, given its ownership of the Android operating system. Yahoo is trying to catch up with projects like Aviate, a launcher in the vein of Google Now that suggests apps for you to use.

Yahoo may still suffer from a bad reputation as a relic of the nineties and perpetual second place to Google, but these current initiatives show that it’s still a viable company looking to for a field in which to distinguish itself.