• by Tim Daly , April 11, 2008

The plot thickens in the salacious story of Yahoo, Google and Microsoft and the story line tends to read more like a daytime drama than tech business coverage. The recent juicy developments in the Google, Yahoo and Microsoft love triangle have industry pundits and marketers glued to their computer screens and gossiping at the water coolers.

Yesterday marked a particularly juicy episode in this drama; jam-packed with unseen plot twists. First, Yahoo and Google announced the formation of an "experimental" partnership that will open 3% of Yahoo's U.S. search distribution to Google for up to two weeks. If this wasn't enough excitement for one day, The New York Times reported that Microsoft and Rupert Murdoch's News Corp. are in negotiations to make a joint bid for Yahoo. The day also included rumors of a merger between Yahoo and Time Warner's AOL Internet Unit. All we were missing was a Bobby Ewing cliffhanger that all the activity was just a dream.

Surely, there are lots of topics we could discuss while the three behemoths duke it out on the front page of business sections worldwide. Let's focus our discussion today on the Yahoo and Google "test" partnership that triggered all this drama. Pundits were quick to label this as an attempt to disrupt Microsoft's pending hostile takeover. Microsoft quickly responded to the announcement by voicing regulatory concerns that a deeper partnership would give Google an uncompetitive 90% market share. This is but one of the concerns voiced in response to this announcement.

We know what this partnership could mean for Yahoo, but what could this development mean for Internet advertisers and end users? Are Google and Yahoo considering all stakeholders involved? Is the current financial situation at Yahoo forcing a nearsighted attempt to quell stockholder concerns? Will Google and Yahoo share with the public the objectives of their test? Does this "experiment" have intrinsic value at all to advertisers and consumers?

These questions are being echoed in the advertising industry hallways. The days of open-auction CPCs are long gone, replaced by algorithm-determined prices that can fluctuate daily. Quality Score and Ad Rank are the factors used to determine ad positions and ultimately cost. Some may say that in light of this "experimental" partnership, advertisers are entrusting these organizations to implement a test without disrupting the status quo, while running the risk of infiltrating their algorithms with foreign data that could dramatically impact advertising costs.

The overwhelming question is whether advertisers have trust in the execution of the test, as most have not forgotten the consistent time delays with the launch of Yahoo's Panama platform. Every test has its merits--and I truly believe this one does, yet there is little indication of how this test may affect advertising pocketbooks.

How could Yahoo and Google ensure that advertisers sleep easy during their "experiment"? Given that they appear to be implementing an ALPHA test in a live environment, a first step may be to ensure that no data is cached within algorithm databanks and is housed separately from both companies' main data centers to ensure the integrity of their existing algorithms. Secondly, both Yahoo and Google should request an opt-in agreement from their advertisers to participate in this test. Finally, on the 3% of ads in question, no click charges should be applied to advertisers who opt-in and agree to be part of the experimental trial. Hey, even the pharmaceutical companies compensate the participants involved in their studies.

Perhaps these or similar measures might put advertisers at ease. It will certainly be interesting to see if any efforts are made by the search giants to pacify advertisers. This being said, it would be hasty for advertisers to immediately condemn this new coupling, as this partnership could very well be instrumental in spawning stronger online advertising mediums by creating ever-more relevant nexuses for brand and consumer interaction. Google extending its network into Yahoo's audience may also result in greater end-user relevance, thus broadening the overall search forum.

Regardless of how this drama may play out, it is safe to say these new bed partners will send rippling effects across the industry and keep captive the world's attention. And if you don't believe me, just ask a senior executive at Microsoft, News Corp, or Time Warner/AOL.