Yahoo! Tests Expanded Paid Listings

Yahoo! confirmed Wednesday that it began testing a new search layout that serves up additional paid listings from Overture Services , as the portal continues to experiment with ways to embed more paid search into its site.

In the test, Yahoo!’s search result page returns four shaded boxes on the right side of page with additional sponsored links. The boxes are in addition to the four paid listings that appear on the top of search results pages via Yahoo!’s exclusive search provider Overture Services.

Yahoo! spokeswoman Diana Lee said the company was testing the additional listings with a small sample of its audience, while cautioning that it did not imply any impending extension of the company’s relationship with Overture.

According to a research note issued yesterday by U.S. Bancorp Piper Jaffray analyst Rafa Rashtchy, the shaded boxes could mean a deeper and more lucrative relationship with Overture down the road, if Yahoo! follows up on the test with an expansion of paid listings throughout the portal.

“We believe that if Yahoo implements these additional listings, clicks from Yahoo could increase by 10 percent to 30 percent, potentially increasing Overture’s revenues by the same amount, if the terms of the expanded deal are similar to the original one (which we expect it will be),” Rashtchy said.

An Overture official confirmed the test, but also downplayed its significance. He said Overture tests a number of services with partners and this particular one did not presage an expansion of the Yahoo! relationship.

Overture and Yahoo! already have an important partnership for both companies. In 2002, Yahoo! reported that its paid listings business contributed $120 million in revenues, making it the biggest reason why the company was able to return profits for the past three quarters. For Overture, Yahoo! represents between 25 and 30 percent of its business, according to Rashtchy.

Speaking at an investor conference last month, Overture CEO Ted Meisel said the company was undergoing tests with Yahoo! aimed at building on their relationship.

Yahoo! CEO Terry Semel has said the company will move to make search a major part of all parts of the Yahoo! site. In December, Yahoo! paid $235 million to acquire search technology company Inktomi to further that goal.

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