Yahoo is testing Google ads

SAN FRANCISCO – Yahoo Inc. is surrendering some of its advertising space to Internet search leader Google Inc. in a test that appears designed to frustrate Yahoo’s unsolicited suitor, Microsoft Corp.

The experiment announced Wednesday will allow Google to place ads tied to about 3 percent of the queries made in the United States through Yahoo’s search engine – the Internet’s second largest after Google’s. Without specifying a start date, Yahoo said the Google tests will last for up to two weeks.

The Sunnyvale, Calif.-based company said it hasn’t decided to join the thousands of other Web sites that rely on Google to handle most of the text-based advertising that is tied to search requests or their other content.

The possibility of Yahoo working with the Internet’s most profitable company throws a new twist into its efforts to evade Microsoft or extract a higher offer.

Yahoo insists it’s worth more than the initial bid of $44.6 billion, or $31 per share, that Microsoft made more than two months ago. But Microsoft hasn’t budged and recently threatened to lower the bid unless Yahoo capitulates by April 26.

In a statement Wednesday, Microsoft reiterated its belief that the current bid is fair and questioned whether antitrust regulators would allow Google and Yahoo to form a permanent partnership.

Google and Yahoo together control about 81 percent of the U.S. search market, according to the most recent data from comScore Media Metrix. If Yahoo were sold to Microsoft, those two companies would have a combined 31 percent market share in the United States – far behind Google’s 59 percent.

“This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo,” said Brad Smith, Microsoft’s general counsel. “We will assess closely all of our options.”

Sen. Herb Kohl, D-Wis., said an antitrust committee that he chairs would scrutinize any long-term alliance between Yahoo and Google.

Kohl indicated lawmakers are particularly concerned at signs that competition may lessen in the Internet ad market because Google just bought DoubleClick Inc., a major online marketing service, for $3.2 billion.