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Google Snags More Of The Internet Ad Gold Mine

Friday, 13 Jun 2008 | 9:34 AM ET
Yahoo partners with Google
CNBC.com
Yahoo partners with Google

After Microsoft and Yahoo's drawn-out acquisition dance officially ended Thursday, Yahoo partnered with Google. Yahoo lost out on Microsoft's $47 billion dollar offer and instead made a more modest deal with the online ad behemoth.

Google ads will appear next to Yahoo search results, giving Google even more marketshare, and expected to ring Yahoo some $800 million in annual revenue.

My colleague Jim Goldman gets into the details of how the deal went downand how it might pay off. So I'm curious to look at it what it means for the online ad space. The deal is nonexclusive, but still raises serious anti-trust concerns, so much so that Yahoo and Google have already started talking to the Justice department. Now the two companies are waiting until federal regulators take a hard look at the deal-- waiting to start the deal for three and a half months.

The definitive business of the Internet is search ads--while other businesses have emerged, nothing comes even close to competing. (Social networking may be huge, but its ad revenue isn't anywhere as close to the buzz.) At first Google and Yahoo were competing for similar search ad dollars, now Yahoo is admitting it's no longer a real contender.

So what now for Yahoo? The stock dropped in after-hours trading on the news. It simply seems like Google owns the online ad game, and Yahoo has to figure out what its new game is. That challenge, on top of trying to get this deal approved. Then there are the shareholder lawsuits and Carl Icahn's proxy fight.

What about the rest of the Internet ad space that Google doesn't dominate? Other than Microsoft and Yahoo, there's AOL and Microsoft, so it wouldn't be a surprise if those two teamed up in light of this Google/Yahoo pairing.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.