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Yahoo tests new search layout

The Web portal is testing a new layout for search results that packs more paid listings onto a page, a move that could increase its revenue and provide a big boost for partner Overture.

Yahoo is testing a new layout for search results that packs more paid listings onto a page, a move that could increase its revenue and provide a big boost for its paid search partner, Overture Services.

The Web portal is displaying boxed links from Overture along the right side of query pages, a format that is similar one used by rival Google.

Until now, Yahoo has typically displayed three to four sponsored-text links at the top of its results. The latest test expands that number to about 10. If adopted, the layout could bolster Overture's revenue by 9 percent, according to Safa Rashtchy, senior research analyst at U.S. Bancorp Piper Jaffray.

"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," Rashtchy wrote in a research note on Tuesday. He said that the percentage boost to Overture earnings could be between 2.5 percent to 9 percent, given that Yahoo comprises an estimated 30 percent of its sales.

Yahoo spokeswoman Diana Lee confirmed that the company is testing new layouts of its search results, but she said the exercise is just one of many ongoing experiments with page layouts, new products and services. She said the search tests began in recent months and that the experiment does not imply an expansion of the company's relationship with Overture.

"This test doesn't allude to anything specific," Lee said. "This is just one of several iterations of tests we've run ever since search has become a focus for us."

Financial analysts are closely watching developments in the paid search market, which has helped companies such as Yahoo and Ask Jeeves lay the groundwork for turnarounds. For example, Yahoo in January reported its third consecutive profitable quarter, largely helped by payments from Overture. Even Web properties such as CNN.com and ESPN.com are turning to commercial search services from Overture and Google to augment weakened advertising sales.

Overture auctions search-result placement to advertisers. When Web surfers visit sites that host Overture results and click on the links, advertisers pay the company a price per click, and the company in turn shares that revenue with its distribution partners.

Bancorp's Rashtchy's speculated that the new layout signals a major expansion in paid search listings across Yahoo's global network of sites, and that Overture will land a big chunk of that business. He said in an interview that Yahoo has been struck by the potential sales of search-engine advertising and it plans to milk it for more.

He estimates that four of every 10 Web surfers searching online are prime targets for paid links to related products and services. Yahoo and others are capitalizing on only about 10 percent of those opportunities, he said.

"There is unmonetized revenue out there," Rashtchy said. "Yahoo has realized that they have hit a gold pot here, but they've only scratched the surface and they want to dig much deeper to get more gold."

For its part, Overture regularly tests new implementations of search pages with partners, said spokesman Al Duncan.