Close on the heels of Microsoft’s bid to take over search engine giant Yahoo, comes the news of a deal between Yahoo and Google. Nowhere along the lines of an attempted takeover, this search advertising partnership will see Yahoo buying some of Google’s online ads to display alongside its own on its search result pages in the US and Canada.

The new agreement was announced on Thursday June 12th, soon after Yahoo’s shares crashed 10% in the stock market following the news that it was putting an end to takeover talks with Microsoft. Yahoo had to act fast to calm the ruffled feathers of its shareholders and did just that by entering into a deal with archrival and search engine giant, Google. Yahoo expects this ad partnership to fetch a cool $800 million in annual revenue.

Speaking about the agreement, Eric Schmidt, Google’s chairman and chief executive said, “This commercial agreement provides Yahoo with the opportunity to deliver more relevant ads to users and provide advertisers and publishers with better advertising technology.”

According to the terms of this deal, not only does Yahoo get to choose the search terms for which to display Google’s ads, it also gets to choose the pages on which these ads will be displayed. The agreement could last for up to 10 years depending on whether Yahoo chooses to renew it after the initial four-year term.

In addition to the ad-partnership, Yahoo and Google have also decided to make their instant messaging networks interoperable, allowing the users in these networks to cross communicate.

The agreement can be terminated in the event of a change in control of either party. It also states that Yahoo would have to pay a termination fee of $250 million if the agreement is terminated due to a change in control during the first 24 months.

Both the companies have stated that although they do not require regulatory approval, they would nevertheless wait for three and a half months before implementing the partnership, so that the US Department of Justice can fully review the arrangement.

In the meanwhile, experts and novices alike will continue their analysis of the effects that this deal will have on the online search scene. Only time will tell whether this partnership brings about a change in Yahoo’s fortunes.

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