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The Microsoft – Yahoo! search alliance has been functional in the U.S. for some time, and they now intend to expand ad testing to Europe as well.

To begin with, Microsoft adCenter will start providing paid search results to Yahoo! sites in France, Ireland and the U.K.

Ranked second and third most popular search providers in the UK, Yahoo! and Microsoft hope to be able to achieve this in the first trimester of 2012. Advertisers and marketers will accordingly be informed about actions they can take with regards to their adCenter accounts and budgets.

Testing of the paid search results is expected to begin by mid January itself, but will be limited to a small percentage of Yahoo! traffic. Marketers have been advised to closely monitor their campaigns and prepare to increase their budgets, especially if the budget is currently depleted more than 80% daily.

Location targeting capabilities of adCenter are also being improved in order to help advertisers reach a more relevant audience, with new language and location targeting options. This will help European advertisers to reach users in various locations where the same language is spoken. They will also be able to decide which location they wish to target via choices ranging from a bundle of countries to individual cities. They will also be able to apply bid-boosting to focus their spending more effectively.

Testing and adjustments will continue until the second quarter of the year, by which time, Microsoft and Yahoo! are likely to be ready for a full-scale roll out of these services.