Yahoo have followed up their initial trial with Google’s search technology in signing a non-exclusive deal to carry Google ads on Yahoo properties in the US and Canada. The deal also includes moves to improve interoperability between the companies respective instant messaging services.

Understandably the move has provoked a huge reaction in the blogosphere given the background of the failed Microsoft deal. It is sure to attract the attention of the regulators given the two company’s positions as the top two in search, even if it is non-exclusive.

For Google this gives them access to Yahoo’s massive traffic and for Yahoo a big potential revenue stream and a clear strategic move after the failed Microsoft takeover.