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The industry has long known that Google's search ads are more profitable than Yahoo's. Yahoo put a team of rocket scientists on the problem, only to discover that it's actually harder than rocket science. Now, in extremis, Yahoo is hoping to evade Microsoft by replacing its own ads with Google's. A test has proved successful; analysts say Yahoo could boost its cash flow by $1 billion a year. Now, the problem becomes how to sneak a Yahoo-Google ad deal past antitrust regulators.

The gambit is simple: Most searches are profitless. Only a small number generate any revenue, and a smaller percentage accounts for most of the money Google, Yahoo, and other search engines make when users look up phrases.

Google could take over a very small number of searches, percentage-wise, and yet boost most of Yahoo's search revenues. How could the feds object to a deal which only involves, say, 10 percent of Yahoo's searches?


The trick for Microsoft is to make the argument about money, not traffic. That will be difficult, since Google can change the topic from search ads, where it dominates, to display ads, where it trails behind AOL, Microsoft, and Yahoo. Google played games with market-share definitions well enough to buy DoubleClick, despite a ferocious lobbying campaign by Microsoft. Opposing a commercial deal, not an acquisition, will be even harder for Microsoft. A Google-Yahoo deal could happen — and if it does, it will be by the numbers.