Yahoo, Google Close in on Search Ad Deal

A successful system test puts Yahoo in the catbird seat with Microsoft

By Jim O'Neill

Posted Apr 17, 2008 8:45 AM CDT

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Yahoo, Google Close in on Search Ad Deal — The logo of Google, seen on the front door of the new Google Engineering center in Zurich, Switzerland. (AP Photo/Keystone, Walter Bier, file)

A deal that would have Google operate Yahoo’s core search ad business may be closer now that the two have successfully tested the system, reports the Wall Street Journal. An agreement would increase Yahoo’s cash flow by as much as $1 billion annually, and give it additional leverage to fight a hostile Microsoft takeover bid—or at least boost its sale price.

Yahoo also is talking with Time Warner’s AOL about a deal giving it 20% of a combined company. An agreement with Google could make that more likely to happen as well. Yahoo has derided Microsoft’s $42 billion bid as too low, insisting the software giant sweeten its offer. A positive Yahoo earnings report next week could add ammunition to its argument.

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