Gmail's New Ad System

I've previously reported about Gmail's experiments with image ads and personalized ads, but it seems that these tests are two pieces from a puzzle: a new ad-matching system for Gmail.

New York Times reports that the new algorithms try to find better ads. "Alex Gawley, Google's senior product manager overseeing Gmail, (...) said Gmail's revamped ad-matching system, now in limited tests, analyzes context as well as the content of an individual message. It looks at what he calls 'signals in your inbox,' like whether you open messages with particular keywords and don't open those with other keywords."

Gmail will also include static image ads. "For example, an e-mailed offer for a ski package showing a skier on the slopes could be accompanied by an ad on the right side of the screen, showing a competing offer, replete with another skier coming down another slope. Mr. Gawley said the image used in the ad would be static, not animated, and would be used only in cases where the e-mail message itself showed images."

Gmail's new ads will still be related to your messages, but Google will add other signals that will make the ads an extension of your inbox. Just like Google shows small images ads next to images search results and uses your preferences to personalize ads, Gmail's contextual ads will improve using more data.

As long as the ads are relevant, moderately useful and they aren't distracting, Google is still on the right track. It might take a while to get used to the image ads, but the ad displayed below the messages and the list of messages will be the most obnoxious. "Gmail presents a single text ad when you look at an inbox view and haven't selected a particular message," according to the New York Times.

Personalized Gmail Ads

Gmail will soon start to personalize ads based on your preferences.

For example, if you've recently read a lot of messages about cameras, maybe you'd like to see an offer from your local camera shop. On the other hand, if you've reported these messages as spam, or marked them 'not important' you might not want to see that offer. Soon, some of you will start seeing fewer ads overall, and focused on subjects we hope will be important to you, at the right time.

Unlike Google Search, you can disable personalized ads from Gmail's settings page. Just make sure that this option is not checked: "Show more useful ads by using importance signals from across my messages".

"Only a few users will notice the change to begin with, but as we improve it we'll roll it out more widely. As always, ads in Gmail are fully automated - no humans read your messages - and no messages or personally identifiable information about you is shared with advertisers. We've already cut down the number of ads shown per Gmail user by more than a third, and we hope these signals will enable us to continue to show fewer, better ads in Gmail," explains Google.

Google also tests a new ad format that includes offers and coupons for your local area, which might be related to Google Offers, a service that will compete with Groupon.

Gmail Tests Image Ads

Greg Sterling spotted image ads in Gmail and this seems to be a controversial Gmail experiment. A Google spokesperson said that Google "recently started experimenting with image ads on messages with heavy image content." Greg confirmed that the image ads aren't displayed next text-only messages and they sometimes appear next to HTML messages that include a lot of images, especially newsletters.



Gmail's image ads are contextually targeted, but it's unlikely that users will tolerate them well. After all, one of Gmail's selling points was that it only used relevant text ads. Here's Google's answer from 2005 to the question "What makes Gmail different?": "There are other differences in the way Gmail provides access to your email. For example, Gmail automatically groups an email and the replies to it as a conversation. That means you always see a message in its proper context. And there are no pop-ups or banner ads in Gmail, just relevant text ads and links to related pages". Google's explanation continues: "[Gmail ads] are small and unobtrusive. They don't fill half your screen and we don't make you read them just to get to your inbox. Ads are never inserted into the body text of either incoming or outgoing Gmail messages and you won't see any pop-ups or untargeted banner ads in Gmail."

It's interesting to see that a Gmail page about privacy explains that "showing relevant advertising offers more value to users than displaying random pop-ups or untargeted banner ads". The key words are "random" and "untargeted".

{ Thanks, Greg. }

Google Tests Gmail Ads Below Messages

Google tests a new ad block below messages. It's not available to everyone, so Google probably tests its effectiveness.

Jordon, a Gmail user who spotted the new ad format, thinks it's "a bit more direct than other GMail ads", while Daniel Spiewak finds it annoying. It's certainly more noticeable than the ads from the right sidebar and you might accidentally click it when you try to reply to a message.



{ Thanks, Websonic, Jordon and Vasu. }

Google's Plans to Improve Ad Targeting

The Wall Street Journal got hold of a confidential Google document from 2008 about interest-based advertising, a feature that was released last year. In addition of providing ads that match the content of a page, Google wants to improve ad quality by creating user profiles based on the sites you've visited.

Selling ads is Google's big money-maker, but the online-ad business is broadening away from Google's sweet spot, selling ads tied to the search-engine terms people use. Instead, advertisers want to target people based on more specific personal information such as hobbies, income, illnesses or circles of friends. (...) Few online companies have the potential to know as much about its users as Google. (...) Significantly, however, Google doesn't mix the separate pots of personal data. For instance, it doesn't use data gleaned from a person's Gmail account to target ads to that person elsewhere online.

Google's internal document suggests that this might change. Google could use data from properties like Gmail, Orkut and even search queries to improve ad targeting. Here's an extract from the document:

Over time, as the value of audience targeting is proven and the market reaction to these practices is realized, we will discuss the use of Search data. Google Search is the BEST source of user interests found on the Internet and would represent an immediate market differentiator with which no other player could compete. Search could be used to populate user interests. It can also be used to create new surround-search targeting options in which relevant display ads (or text ads) could be delivered on [Google Content Network] to a user within 15-60 minutes of a given search, whereby the timeliness of the ad would presumably increase its relevancy to the user.

It's important to note that the author of the memo is Aitan Weinberg, a former DoubleClick executive who is now a senior Google product manager for interest-based advertising. WSJ says that Google's executives were against using cookies to track people online, but the DoubleClick acquisition changed their perspective.

For the first time, Google had the ability to deliver ads targeted to individual people's computers. But just because it had the ability, Google didn't start using it. There was still too much internal resistance. (...) Tensions erupted during a meeting with about a dozen executives at Google's Mountain View, Calif., headquarters about 18 months ago when Messrs. Page and Brin shouted at each other over how aggressively Google should move into targeting, according to a person who had knowledge of the meeting. (...) Mr. Brin was more reluctant than Mr. Page, this person said. Eventually, he acquiesced and plans for Google to sell ads targeted to people's interests went ahead.

Despite the internal resistance, it's tempting to cross-correlate data about users. Showing contextual ads in Gmail seemed creepy at first, but the ads turned out to be quite useful.

{ via Google Blogoscoped }

Google Reveals AdSense's Revenue Share

Google revealed an important secret: the revenue shares for two AdSense services. Until now, publishers didn't know the percentage of the revenue that is paid by Google.

"AdSense for content publishers, who make up the vast majority of our AdSense publishers, earn a 68% revenue share worldwide. This means we pay 68% of the revenue that we collect from advertisers for AdSense for content ads that appear on your sites. (...) We pay our AdSense for search partners a 51% revenue share, worldwide, for the search ads that appear through their implementations."

It's interesting to note that the revenue share for AdSense for content has never changed since the service was launched, back in 2003.

Sevices like Google Search, AdWords and AdSense are usually treated as black boxes, since Google rarely reveals specific information about its algorithms.

Google AdSense's help center still says that "each AdSense publisher receives a percentage of the cost an advertiser pays for user clicks or impressions on their ad. This percentage is referred to as the revenue share. Google does not disclose the revenue share for AdSense."

Google's financial results for the first quarter of this year, show that only 30% of Google's total revenue is from partner sites and the traffic acquisition cost (TAC) is 26% of the revenue. "The majority of TAC is related to amounts ultimately paid to our AdSense partners, which totaled $1.45 billion in the first quarter of 2010." Google's partner sites generated revenues, through AdSense, of $2.04 billion. Obviously, 1.45/2.04~=0.71, which is very close to the AdSense for Content revenue share.

Google Maps Mixes Search Results with Ads

Google Maps has a new feature for business owners in the US: "for just $25 per month, businesses in select cities can make their listings stand out on Google.com and Google Maps with Tags". Google allows businesses to add yellow markers on the map and to promote their websites.

The new Google Maps ads don't influence ranking, but they make some of the results more visible. "Tags do not affect the rank of search results; they simply add more information when a particular user is searching," explains Google.



Until now, Google Maps ads were clearly separated from the organic search results, just like the ads from Google's web search results pages. For only $25 a month, local businesses can now customize their snippets and add a distinctive marker on the map. This features makes the distinction from search results and ads blurrier.

Google doesn't allow publishers to pay for advanced features like customizing snippets, adding rich snippets, showing thumbnails or favicons next to search results. "Google doesn't accept payment to crawl a site more frequently, and we keep the search side of our business separate from our revenue-generating AdWords service," mentions an article from Google's help center for webmasters.

In other related news, Google Local Business Center is now known as Google Places and businesses from US, Japan and Australia can apply for a Google photo shoot. "Google's photographers are specially trained to take great photos of building interiors, dealing with some of the challenges such as low lighting and tight spaces. The photographers are also trained to take panoramic pictures using fisheye and wide angle lenses that should translate into great looking pictures of your business."

Google Tests Featured Ads

Search Engine Roundtable spotted a new flavor of Google AdSense ads: featured ads. The ads include a yellow star similar to the one used for bookmarks in Google Toolbar, Firefox and Google Chrome.


According to the description from "Google in your Language", the message is used for "an ad that is determined to be particularly likely to be useful or relevant for a user".


I wonder if the new feature is related to Google's interest-based ads, which "associate categories of interest — say sports, gardening, cars, pets — with your browser, based on the types of sites you visit and the pages you view. [Google] may then use those interest categories to show you more relevant text and display ads."

{ The first screenshot is licensed as Creative Commons. }

Google Buys AdMob

Google acquired AdMob, a mobile ad company well-known for its innovative solutions to monetize iPhone apps and iPhone-optimized web sites. "AdMob is the world's largest mobile advertising marketplace, offering solutions for discovery, branding and monetization on the mobile web."

"Publishers and developers are increasingly searching for ways to make more money from their content in the rapidly evolving online mobile space. Google is working hard to provide those means of monetization so that mobile content can grow as quickly as we'd all like it to. AdMob accelerates this process for us with their talent and technology," explains Google. "Google currently makes a very small amount from mobile ads relative to our overall revenue, but the prospects for this space are excellent."

In the past year, Google has launched many feature that improved mobile ads: a new search ad format for iPhone and Android phones, ads for mobile apps, better AdSense ads for smartphones.

"Despite the tremendous growth in mobile usage and the substantial investment by many businesses in the space, the mobile web is still in its early stages. We believe that great mobile advertising products can encourage even more growth in the mobile ecosystem. That's what has us excited about this deal," mentions a Google blog post.

Google paid $750 million for AdMob, the third biggest Google acquisition after DoubleClick ($3.1 billion) and YouTube ($1.65 billion).

More In-Your-Face Google Ads

Barry Schwartz mentioned last week that Google tests a new position for search ads. The ads stay closer to the organic results and they're no longer next to the scrollbar. The experiment was probably successful and the change should be visible to everyone.



Google also started to show related searches below the ads and the suggestions are commercially-oriented. It's a good way to show more relevant ads and to determine the user's intention.

Some of the ads display product listings from Google Base and Google shows a thumbnail next to the list of products.


Update. Daniel Dulitz, from Google, has an interesting comment: "It would be easy to just increase revenue. What is hard is to make ads appropriately visible when you want to see them without being in your face when you don't want to see them. People are smart -- users ignore banner ads because they've proven useless over time -- so if you just make ads more visible, without regard to their utility, it's doubly self-defeating. Very tricky business."

Ads in Google Suggest

Google Suggest has been recently updated to include top search results and search buttons, but the most surprising additions are sponsored links. Here's how Google explains why you'll sometimes see ads below the suggestions:

"Similar to the navigational suggestions, sometimes we detect that the most relevant completion for what you're typing is an ad. When an ad is shown, we mark it with the text "Sponsored Link" and a colored background, as on the results page."


The updated Google Suggest will have an interesting side-effect: you'll see the search results pages less often. Google saves you a few clicks by suggesting search results directly from the homepage, much like Google Chrome's omnibox, but monetizing the suggestions seems out of place. The ads draw attention from the list of suggestions, they're unnecessarily large and they clutter the interface.

Hopefully, Google won't show sponsored links in the list of suggestions very often and Google will focus on adding useful suggestions like: unit conversions, results from Google Calculator, facts etc.

Side notes:
* I don't see the ads in Google Suggest, so maybe the feature hasn't been publicly launched yet.
* Is this the first time when Google shows third-party ads on the homepage?

AdSense Reports in Google Analytics

The integration between Google Analytics and Google AdSense is a significant upgrade for AdSense's limited reports. Until now, AdSense didn't offer reports for individual pages and users had to manually create custom channels to track the performance for up to 200 pages.

The AdSense section from Google Analytics includes a lot of new information: the list of pages that bring the most important revenue, the most profitable referrers and you can find even more by creating custom segments.

Here are some things I was able to find from the reports:

* 63% of this month's revenue was from visitors who use IE, even if only 38.42% of the visits were from Internet Explorer users.


* 6.18% of the revenue was from Mac users, even if 10.24% of the visits were from Mac users.


* the visitors that come from Google Search click on the ads less than those that come from Yahoo Search and Live Search.


* new visitors are more likely to click on ads than returning visitors.


Google Analytics blog has more details about the integration and the way you can link your AdSense account with Google Analytics.

Google, a Non-Profit Organization?

"PSAs are non-profit organization ads that are served to pages when targeted ads are unavailable, or when Google is unable to gather content from the page. Publishers do not receive earnings for clicks made on PSAs," mentions a page from Google AdSense's help center.

I noticed a Google ad from a Romanian site that promoted Google search. The ad linked to the Google search results for a historical question regarding the Romanian Independence War, but it was labeled as "Public Service Ad". Since when is Google a non-profit organization?


It's not the first time when Google uses public service ads to promote its own services. Last year, Google promoted a special page about the US elections using public service ads.

According to Wikipedia, "public service advertising is the use of commercial advertising techniques for non-commercial purposes. (...) Such advertising is generally produced and distributed on a cooperative basis by governmental agencies or nonprofit organizations acting in concert with private advertising and mass media companies. In most cases, the nonprofit provides the programming that is to be advertised, while the participating advertising agency and media companies provide creative services, media planning, and dissemination services on a pro bono basis."

{ Thanks, Philipp. }

Ads Next to Picasa Web Albums Search Results

Google started to display text ads above the search results from Picasa Web Albums. In the recent months, Google turned to the services that weren't yet monetized to improve its financial performances: Google Image Search, Google News, Google Finance and now Picasa Web Albums.


"We've been testing different advertising formats for years (some have been more successful than others), and over the next few months, you'll see us continuing to experiment with new ads in new places. (...) Whenever we make changes like these, we carefully evaluate users' reactions to ensure we're holding true to our basic principles: that ads by Google should always be relevant and useful. Of course, these experiments benefit Google because they generate revenue from new sources — but by ensuring that we show the right ads at the right time to the right people, we'll add value for users too," explained Google in November.

Now that the revenues from advertising grow much slower than in the past, Google will probably launch more paid services like the App Engine or Google Apps Premier Edition. Even Google Checkout, a service that has been subsidized by Google for years, will use the same processing fees as PayPal from May.

Behavioral Targeting in Google AdSense

As part of the integration with DoubleClick, Google announced last year that it would use DoubleClick's DART cookies to improve the way ads are displayed on the Google content network. The list of improvements included in-depths reports for advertisers and preventing ads from being displayed too frequently to the same user. "We are enabling this functionality by implementing a DoubleClick ad-serving cookie across the Google content network," mentioned Google at that time.


The integration will soon expand since Google intends to offer behavioral targeting or interest-based advertising, as Google likes to call it. "We think we can make online advertising even more relevant and useful by using additional information about the websites people visit. Today we are launching interest-based advertising as a beta test on our partner sites and on YouTube. These ads will associate categories of interest — say sports, gardening, cars, pets — with your browser, based on the types of sites you visit and the pages you view. We may then use those interest categories to show you more relevant text and display ads," explains a post from the Official Google Blog.

The DoubleClick cookie contains a unique ID that is associated with all your visited pages that include ads served by DoubleClick. If you're visiting a lot of pages related to music, Google will place you in one of the 600 predefined categories (most likely, music enthusiasts) and will use this information to show more ads about music. For now, Google will use interest-based targeting to show better ads when the content of a web page doesn't include enough information to serve contextual ads.

Google also launched a page where you can enter a list of categories that reflect your interests. If you don't likely the new targeting options, the same page offers two ways to opt-out: either by setting a special opt-out DoubleClick cookie or by installing an add-on that protects your cookie. Another option is to block all the cookies sent from doubleclick.net. Google promises to offer an option for AdSense publishers to disable interest-based targeting, but the publishers still need to change the privacy policy to reflect the new features.

While behavioral targeting is not new and many other companies are using it, Google tried to alleviate the worries about profiling users: it won't create sensitive interest categories like race or religion and it won't cross-correlate the data with other information saved in Google accounts.

Google tries to use the enormous reach of the content network (75% globally) to attract more display ads, but the risk could be too high: Google's ads were perceived as non-intrusive, relevant and complementary to the page where they were placed. Focusing more on display ads, using recently visited pages to target ads to users could change that perception and Google will lose its most important asset: user trust.

Text Ads in Google Image Search

After months of experimentation, Google choose to show text ads above image search results. It's not clear if the ads are actually useful for those who visit Google Image Search to find images, but Google mentioned last year that the volume of commercial queries has increased significantly.

"Whenever we make changes like these, we carefully evaluate users' reactions to ensure we're holding true to our basic principles: that ads by Google should always be relevant and useful. Of course, these experiments benefit Google because they generate revenue from new sources — but by ensuring that we show the right ads at the right time to the right people, we'll add value for users too," explained a Google blog post from November.


In 2006, Google estimated that it could earn $80-200 million a year by including text ads in Image Search. Google decided not to monetize Image Search because the experiments showed that people used the service less. I wonder if the experiments from 2008 showed different results.

It's worth mentioning that the only other important image search engine that shows ads is Ask.com Image Search.

More YouTube Ads

Two years after being acquired by Google, YouTube still hasn't figured out how to monetize the site. "We believe the best products are coming out this year. And they're new products. They're not announced. They're not just putting in-line ads in the things that people are trying. But we have a number — and, of course, Google is an innovative place," said Eric Schmidt in August.

One of the new products replicates Google's search ads and adjusts them to a video site. "Sponsored Videos is a self-serve advertising platform that will allow you to promote your video to the audience you are interested in reaching in an easy, effective, democratic, and affordable way. Then, when people use YouTube to search for videos, YouTube will display the most relevant, compelling videos alongside the search results," explains YouTube Blog. Any company or YouTube user from the US can promote his channel or one his videos next to the search results.

Since YouTube controls the search results and hosts the videos, it can provide more measurable results. YouTube can track if the user watched the entire video, if he subscribed to the channel or clicked on the link to the advertiser's homepage.


Another part of YouTube's monetization strategy is expanding the in-video ads to embeddable players. "To date, YouTube has only run ads against partner videos on YouTube itself, and with people viewing millions of embedded YouTube videos every day, this meant that partners were not generating revenue from their views outside YouTube.com. But now, YouTube partners will be able to capitalize on their popularity across the internet and generate revenue from their content no matter where their video lives," informs AdSense Blog. Until now, many YouTube partners disabled the option to embed videos because they couldn't make money from this distribution channel. This change will only affect 4% of the videos uploaded to YouTube, but the percentage of views is much more significant.


The text ads displayed at the bottom of the video can be minimized, but they could cover an important part of a video (for example: annotations, captions) and they're distracting. Most of them link to web pages, but there are some ads that open a new video inside the player.

Google needs to make YouTube profitable and it's nice to see that the ads are often relevant, they don't interrupt videos and they don't make you wait.

Google Launches AdSense for Feeds

I noticed a new option in my AdSense account: AdSense for feeds, a program that displays contextual and placement-targeted ads in FeedBurner feeds. FeedBurner announced in May that AdSense for Feeds will be available to a small number of publishers and now it seems that everyone can use it.

FeedBurner has recently closed FAN, its advertising network. "No new applications for FAN publishers are being accepted and we expect the broad variety of options provided through AdSense (including the new AdSense for Feeds product, powered with FeedBurner feeds) will give publishers valuable new revenue-earning potential," says a FeedBurner/Google employee.

The new AdSense for Feeds option lets you create a new ad unit that has a format automatically selected from 468x60 and 300x250. "Generally, the 300x250 size will display when there's more content and when your feed is being viewed in a device with a larger display," explains Google. You can choose if you want image ads, the ad frequency, the position (top or bottom of the post), the colors and a channel that tracks the ad performance.



For the moment, there's no connection between your AdSense account and the FeedBurner account, so Google automatically adds the FeedBurner service to your AdSense account. Unfortunately, your feeds are still connected to the old FeedBurner account and you need to migrate them first. The migration process is manual: just send an email at adsense-support-aff@google.com and mention your FeedBurner username and the AdSense account email address.


From AdSense, you can easily burn a new feed by entering the address of your blog and selecting some tracking options. The feeds can be managed at the new FeedBurner site, but there's no visible change other than the integration with Google Accounts and the new URLs for feeds: http://feedproxy.google.com/NAME.


Here's an ad from a feed of a FeedBurner/Google employee:


I doubt that these ads are an effective way to monetize feeds, since people use feed readers to get timely updates from a lot of sites and spend less time for each item. Besides, feed readers are mostly used by tech-savvy readers that are less likely to click on ads.

At some point, I may experiment with some infrequent ads in Google Operating System's feed and I'll post my findings.

Resources:
AdSense for Feeds Help Center - you should read the tips
Migrating an existing FeedBurner account
The new FeedBurner homepage

Ads as a Source of Information

At the most recent Google earnings call, Sergey Brin said some interesting things regarding the ads from search results pages. Google tries to reduce the number of ads that are displayed and the number of queries that show ads as it improves the targeting and the ads are more effective.

We try to reduce our coverage at the same time as improving the monetization. But clearly that's not the ideal strategy indefinitely, because we don't want to end up with no ads. And in fact from a quality point of view, we now find our ads are a significant addition quality-wise to our page. They are just a very important source of information. (...) We're all the time running experiments. We run some people without any ads at all, and we know that our ads add value so we know that we're happy about having them.

Jonathan Rosenberg quoted Larry Page, who "often says that we'd be best off if we just showed one ad, the perfect ad". Showing ads that are relevant to the context makes the sponsored links section an alternative to the list of search results, but I wouldn't call some paid links "a very important source of information". Most ads try to convince people to buy a product or a service and to achieve this they may use manipulation or misleading messages.


Last year, one of Google's ad blogs tried to convince healthcare companies to promote their messages using Google ads:

Moore's film [Sicko] portrays the industry as money and marketing driven, and fails to show healthcare's interest in patient well-being and care. Sound familiar? Of course. The healthcare industry is no stranger to negative press. A drug may be a blockbuster one day and tolled as a public health concern the next. (...) Many of our clients face these issues; companies come to us hoping we can help them better manage their reputations through Get the Facts or issue management campaigns. (...) We can place text ads, video ads, and rich media ads in paid search results or in relevant websites within our ever-expanding content network. Whatever the problem, Google can act as a platform for educating the public and promoting your message.

Advertisers have an agenda and they're rarely objective. They provide facts that are difficult to verify and they rarely support their claims.


AdWords has a big list of guidelines that includes supporting competitive claims, third party verification of the claims and an accurate representation of a product, but not all the ads respect these guidelines.


In an interview from 2004, Sergey Brin said that Google's ads "aren't distracting; they're helpful. (...) We know that when people are looking for commercial things, they use the ads. They know they're ads and they know they're just commercial, yet they use them."

Did you use Google's ads as a source of information? You could check your ad history to see if the ads that attracted your attention supported their claims and offered useful information.

Google-Yahoo Search Ads Deal

In June 2000, Google became the default search engine provider for Yahoo. The agreement lasted until 2004, when Yahoo launched its own search engine. Yahoo realized that you can actually make money from search, so it acquired Overture, a company specialized in pay-per-click advertising that also owned two search engines: AltaVista and AlltheWeb. Unfortunately for Yahoo, it moved too slowly and Google became the leader in both search and PPC advertising.

Yahoo's decision to temporarily outsource some of its search ads to Google was predictable, especially after the two-week test from April. Instead of being acquired by Microsoft, Yahoo chose to partner with a company that has a better search ads system.

"Under the terms of the agreement, Yahoo! will select the search term queries for which - and the pages on which - Yahoo! may offer Google paid search results. (...) Yahoo! believes that this agreement will enable the Company to better monetize Yahoo!'s search inventory in the United States and Canada. At current monetization rates, this is an approximately $800 million annual revenue opportunity. In the first 12 months following implementation, Yahoo! expects the agreement to generate an estimated $250 million to $450 million in incremental operating cash flow. The agreement will enhance Yahoo!'s ability to achieve its goal to grow operating cash flow significantly, while at the same time providing flexibility to continue to invest in ongoing initiatives such as algorithmic search innovation and search and display advertising platforms. It gives Yahoo! complete flexibility to continue to use its Panama paid search results."

Yahoo gets a lot of value from this deal and is no longer pressured by investors to significantly improve the search ads. Even if the agreement has a term of up to ten years, I think this is a short-term deal and Yahoo is more motivated than ever to succeed on its own.

Google Blog is quick to announce that this isn't an anti-competitive move. "Yahoo! will remain in the business of search and content advertising, which gives the company a continued incentive to keep improving and innovating. Even during this agreement, Yahoo! can use our technology as much or as little as it chooses." Since the agreement is non-exclusive and Yahoo won't drop the search ads services, it's unlikely that the U.S. Department of Justice will block the deal.

In other related news, Google Talk users have a reason to rejoice. "Yahoo! and Google agreed to enable interoperability between their respective instant messaging services, bringing easier and broader communication to users." Hopefully, this will actually happen, since the previous agreements with AOL and eBay didn't produce any visible effect and there's still no interoperability with AIM and Skype.

Related:
Search, ads, Yahoo and Microsoft
Could Google save Yahoo from Microsoft?
Yahoo tests Google's search ads

Update: Google Watch has some interesting quotes from the conference call. "We began by saying 'Is there a partnership that would make sense? Is there one that is strategic to both companies and in particular a partnership that would allow Yahoo to remain independent," said Eric Schmidt. "Then Schmidt turned cloak-and-dagger like, noting that the executives met in an empty building that Google owned in an unknown and unfindable location for most of us. Apparently, Yang, Schmidt, Yahoo's Sue Decker and others showed up, sometimes on bicycles."