Yahoo signs pact with Google to earn revenue from ads displayed on its site

Almost giving up on its native advertising business, Yahoo has signed a pact with Google that would allow it to earn a percentage of revenue harvested from ads that are displayed on its site.

The move comes after a similar deal with Microsoft, which operates a rival Bing search business, leaving Yahoo with very little room of its own in that market segment.

Analysts say Yahoo's financial outlook this year, does not look very encouraging.

It expected its fourth quarter revenue to be around $1.16 to 1.20 billion, lower than the already low $1.33 billion estimate made by analysts. Revenue in native advertising slipped from $1.09 to $1.0 billion with Yahoo expecting it to go down further to $920 to $960 million in this quarter.

Yahoo's deal with Google comes as the latest move by Yahoo CEO Marrisa Mayer to turn the company around. Mayer, who is in her fourth year in the job, admits that this was not yet the Yahoo that the company wanted to be.

It had started relying on other companies, like Google and Microsoft, to check its downslide.

The numbers announced yesterday showed Yahoo's revenue, after paying ad commissions, fell 8 per cent from the same time last year to $1 billion, marking the ninth time in the past 11 quarters that Yahoo's net revenue had fallen or remained unchanged from the previous year.

The ongoing erosion had led to worries that the internet company would remain stuck in a mess after it spun off its lucrative stake in China's Alibaba Group.

Mayer continued to promise increased revenue and now it appeared Google, the internet's most profitable company, might play a key role in her plans.

This comes as the company's second attempt to profit from Google's expertise in internet search and advertising.

Yahoo tried had tried to team up with Google in search during 2008 as part of its defense against a takeover attempt by Microsoft Corp.

The proposed Google alliance had to be dropped after the US justice department threatened to block the partnership on the grounds that it would thwart competition.