The two leading search engines – Yahoo! and Google – have decided to join forces!

Yes, after running a beta test with Google in April that found Yahoo! running Google search ads alongside its own search results, the two search giants will soon be entering into a broad-based partnership. Maybe that will keep Microsoft off their heels!

I say they call it Yoogle! Or Goohoo!

But I digress…

Under the terms of this non-exclusive agreement, “Yahoo! will display Google ads alongside their own organic search results in the U.S. and Canada, and outsource a part of their search ad inventory to Google. They will retain the right to do the same with other providers as well. Yahoo! will have the discretionary powers to decide which pages the Google AdSense for Search and AdSense for Content ads will be displayed on. Yahoo! will follow the same open bidding system as Google AdWords, to deliver third party ads to their search results, thus making it possible to include Microsoft in the scheme of things. This deal will not affect their actual organic search results in any way.”

However, in order to avoid any hassles with anti-trust laws, the dynamic duo have decided to wait for three and a half months before actually starting the deal, giving the U.S. Department of Justice, enough time to study the “implications.”

The deal should last 10 years (a initial period of 4 years, followed by two terms of 3 years each, at Yahoo!’s option), and is expected to generate an additional $800 million in revenue for Yahoo! annually. In the first year alone there is expected to be an increase in cash flow ranging from $250-450 million. Now, that’s a lot of searches!

Both behemoths have the option to kill the deal, in case of a change in management of either organization, but if Yahoo! terminates the deal within the first 2 years, it shall be liable to pay Google a termination fee of $250 million less 50% of the revenue earned by Google through the deal. Yikes!

Best of all, the Google ad deal does not prevent Yahoo! from seeking other deals, including one with Microsoft.

Critics say, however, that “while the ad pact might give Yahoo some breathing room, it will do little to help Yahoo address a series of key challenges, including the long-term erosion in Yahoo's search market share, slowing growth in Web traffic and online advertising, and the departure of several key executives.”

Critics also question why advertisers would continue to purchase ads through Yahoo's advertising platform if Google's ad system would serve ads to users of both Yahoo and Google.

Actually, what’s amazing is that this deal is moving forward with great speed, whereas the Sirius/XM satellite radio merger is still been ground to a halt!

But have no fear, Sen. Herb Kohl, the Wisconsin Democrat and chairman of the Senate antitrust subcommittee, promises his panel will closely examine the deal agreement. "This collaboration between two technology giants and direct competitors for Internet advertising and search services raises important competition concerns," he said in a statement.

Baba-booey!

Accuracast.com: Yahoo Inks Google Deal