Recent negotiations between Yahoo and Goggle have lead to a pending partnership. Yahoo will now host Google adwords within its own search engine.

Yahoo will continue to display its own paid search advertisements right next to Google’s ads. An interesting juxtaposition that is sure to cause some initial confusion.

A statement released by Yahoo estimates that the union would bring in an additional $800 million in ad revenue annually. Google and Yahoo will share the revenue generated from the partnership, which is estimated to produce $250 million to $450 million in operating cash flow for Yahoo in year one.

This partnership is sure to increase Google’s preeminence in the search advertising market while increasing the reach of Google’s brand. Google already has a similar ad agreement with AOL and Ask.com.

A Yahoo/Google ad merger has some interesting implications for search marketers. The reach of Google adwords will be greatly increased and the possibilities for reaching new market segments all in one application is a nice benefit, but all of this is going to come with a cost. The pay per click and pay per impression cost of ads will increase due to the rising demand for Google’s ad services.

This move comes at an opportune time for both companies. With the current financial crisis and rapidly declining stock values both companies are sure to benefit from the increased cash flow. But this move is especially important for Yahoo because it will help Yahoo retain their current customer base and help revive the declining usage of Yahoo’s SERP (search engine results page) and allow them to survive in the market place with out a Microsoft buyout.

Anti-trust concerns have been waged. However, most analysts contend that the deal will withstand regulatory inspection. Until committee approval is reached Yahoo and Google have voluntarily delayed the agreement.

I guess in the end sharing is caring. 

Tags: Adwords, Google, Merger, search marketing, Yahoo.