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In a slightly shocking turn of events, Yahoo! - after rejecting yet another offer from Microsoft - announces that they will be testing Google search ads in a small number of its search engine queries.

The test, expected to last up to two weeks, will be limited to 3% of Yahoo! search queries in the US and is specifically for Google’s AdSense for Search service.  Essentially, Yahoo! is becoming a Web publisher that carries Pay-Per-Click text ads from Google.

While Yahoo! noted this does not indicate any further commercial relationship with Google but Microsoft and search marketing advertisers are concerned.  Any merger between the portal and the search giant would give Google 90 percent of the search advertising making the market far less competitive and ultimately establishing a search advertising monopoly.

Meanwhile, Microsoft is not going to give up without a fight - see Scott Kaufmann’s post entitled “Microsoft Will Buy Yahoo!, despite Yahoo!’s efforts.” 

As this test rolls out we will keep you posted on both the results and any future effects this may have on search advertising.