If you’re old enough to remember obsessing for a summer over who shot J.R. Ewing—or, for that matter, who shot Montgomery Burns—then you’re primed and ready for this season’s cliffhanger: What’s with Yahoo! and that search ad deal it just signed with Google?

We won’t know the answer for a few months, because implementation of the agreement is being delayed to give various government agencies a chance to check the pact’s anti-trust effects. But bloggers, agencies, search competitors and just about anyone who uses search marketing to further a campaign have been quick to predict what this means for Yahoo! and for the search industry at large.

Here’s the story so far. In mid-June Yahoo! announced that it had signed a deal with rival search power Google that would let it serve up Google pay-per-click (PPC) ads in some cases rather than those it sold for itself. The Google search ads could appear next to Yahoo! Search results, or they could be delivered on many of the third-party Web pages in the Yahoo! content network. They would probably be mixed with PPC ads sold through the Yahoo! system.

The rationale, from Yahoo!’s vantage, is that Google search terms on average bring in much more revenue per search than Yahoo!’s. Analysts at J.P. Morgan Chase have estimated that Google earns 79% more revenue per search than Yahoo!; other industry experts put the differential anywhere from 60% to 100% more than the number two search engine. This is largely due to better targeting for Google PPC ads; they get more people to click through. And that is a result of (a) having more ads and advertisers to choose from for a given search term, and (b) simply having better ad-targeting technology.

The parties haven’t released the terms of the deal, but Yahoo! has estimated that it could increase the company’s revenue by about $800 million a year. That would be some good financial news for a company in sore need of same. Yahoo!’s share price fell 12% after it announced that it could not reach a deal with Microsoft for its search business. Even before those talks collapsed, activist Yahoo! investor Carl Icahn was threatening to present a slate of pro-Microsoft directors at the company’s shareholder meeting next month, arguing that Yahoo! and CEO jerry Yang should have found a way to make Microsoft’s offer of $9 billion for Yahoo! Search Marketing come to pass.

Interestingly, the ad deal with Google specifies that it can tear up the agreement and stop supplying ads if Yahoo!’s board comes under the control of Microsoft, Time Warner, News Corp. or “any other person or group” within the next two years. Should that happen, Google would also get $250 million in break-up fees. Yahoo! would also be on the hook for more than $2 billion in enhanced severance payments to any employees who left the company within two years of a change in control.

So at the high level, the deal looks like a bid for more cash flow wrapped around a poison pill to deter Icahn’s proxy fight. Down at ground level, there’s some question whether the agreement puts even more control into the hands of Google, which already

Both Google and Yahoo! have agreed to wait until the end of September to implement the ad deal to give the U.S. Department of Justice and other regulators a chance to look at its anti-trust impact. CEO Yang said in a conference call after announcing the deal that he didn’t expect the agreement to hit any regulatory snags because “it’s a commercial business transaction”. In other words, it’s a straight deal to sell online ad inventory, like an agreement to buy factory equipment; it’s not a consolidation within the search marketing industry. Since there are many other sellers of online ads, this deal should pass muster, Yahoo! says.

Omid Kordestani, senior vice president of global sales and business development at Google, bulleted a couple of reasons why the companies believe the deal will get a regulatory okay in a post on the official Google blog. For one thing, Yahoo! will still remain as a search ad competitor and can use Google ads as much or as little as they want.

Just as importantly, Kordestani said, the agreement will not give Google any power to raise prices for PPC ads., because those will continue to be sold on an auction basis both on Google and Yahoo! “We have found over years of research that an auction is by far the most efficient way to price search advertising and have no intention of changing that,” he wrote.

Assuming the deal survives regulatory scrutiny, how will Yahoo! use the Google inventory? According to reports, they will be used primarily to deliver PPC ads against the “long tail”—that is, search terms that don’t get used very often because they’re so specific but that often produce higher clickthrough rates for the same reason.

“Yahoo! monetizes very competitively,” company president Sue Decker said in a call after the announcement. “But we’re not as competitive in the tail… In essence, we’re improving our access to the paid-search universe.”

Mona Elesseily, director of marketing strategy at Page Zero Media, reports that Yahoo! will calculate which terms fall into that “long tail” category based on search volume. In other words, the engine could consider all words and phrases that get less than 100 searches a month to be part of the long tail and thus ripe for a Google rather than a Yahoo! ad.

Elesseily points out in a blog post that Yahoo! could easily expand that “long tail” category to open more of its searches and content pages up to Google ads, especially if the deal starts showing the expected financial results.

And that could have a direct effect upon search marketers, many of whom have turned to Yahoo! to get search visibility for less than they’d spend on Google. “I hate to say it people, but our days of cheaper [Yahoo! Search Marketing] terms may be over,” she writes. “Over the last while, the prices of tail terms have crept up in Google, and as a result the same may happen in Yahoo!”

Danielle Leitch, executive vice president of client strategy at search marketing firm MoreVisibility, points to another wrinkle that might cost marketers money. While the majority of search advertisers buy terms on Google, a considerable subset of those also run PPC campaigns on Yahoo!

“What’s going to happen when you have an advertiser in two places already, and one search partner starts pushing ads to the other engine?” she asks. “Are both your ads going to appear side by side? Will Google or Yahoo! be responsible for flushing out those duplications?” marketers could find themselves paying for two ad slots when they only need one. Even in performance-based marketing such as search, that’s wasteful spending.

David Berkowitz, director of strategic planning for interactive firm 360i, says the suspense about the impact of this Yahoo!-Google arrangement will extend beyond that late September implementation date.

“Ads don’t run in a vacuum,” he says. “Just because Yahoo! could make more money substituting a Google ad for one of its own doesn’t mean that ad is going to perform as well. I know our firm is going to be taking a really deep look at all the campaigns we have running in both places to see what may shift. It’s going to be a long time before we know what this deal is really doing.”

One apparent contradiction in the scenario is Yahoo!’s contention that the increased revenue will help to fine-tune Panama, the revamped search platform it launched in February 2007 with fuller targeting and ad-scoring features that were meant to make it more competitive with Google’s product.

But at the same time, raising revenue by serving up a competitor’s ads looks like an admission on Yahoo!’s part that Panama hasn’t been able to do the job it was supposed to.

“It’s about time,” Leitch says. “It’s too bad, because I think they definitely tried with Panama. But they were just too late to market, and it had too many bugs left when it did arrive. In this game, that will kill you.”

Janel Landis, director of search marketing for SendTec, hopes that Yahoo! will in fact pick up some useful knowledge about serving up PPC ads from this co-opetition with Google—knowledge it can then apply to its own PPC operations.

“From what I’ve seen, the out clause of this agreement makes it pretty easy for Yahoo! to get out,” Landis says. “Yahoo! still has some smart people, and they may see this as an opportunity to gain some competitive intelligence. What if Yahoo! and Microsoft were still able to get together and put that knowledge to work?”

Meanwhile, the deal has re-awakened a strain of Googlephobia that seems to surface with every quarterly statement and market share report from the search leader. Google currently holds about 60% of the U.S. search traffic, compared to just over 19% for Yahoo!, and marketers have long expressed worry that further growth by Google could turn search into a de facto monopoly market.

But Leitch points out that users’ Web habits are changing in ways that may be undercutting the importance of search marketing as a way to drive traffic to your Web site or to get your content discovered.

“There are tons of vertical opportunities out there,” she says. “With the emergence of mobile search and some of these smaller-tier engines—the shopping portals, the travel feeds, the social media—people are going to some of those sites first, before going to the tier one engines. User-generated content has changed the dynamic of searching a lot. Where it was once an afterthought to check a review site or community site, it’s almost more the norm for people to go first to Yelp.com or TripAdvisor.com.

“Google is definitely a dominant force. But all you have to do is look in your analytics to see that people are coming to a site from a variety of places these days.”