Yahoo (NSDQ: YHOO) may be shutting down its contextual ad network Content Match in Europe by March 31, leaving it running only sponsored search and display advertising businesses there, according to a report by SearchEngineLand and later confirmed by Yahoo. Similar to Google’s AdSense, the programme includes ads on pages of Yahoo Publisher Network publishers that are matched to text content. Publishers include ITV, Guardian.co.uk and FT.com.

AdSense pulls down big revenue for Google, but Yahoo is still playing catch-up by a long way, commanding just a six percent share of UK searches against Google‘s 81 percent (Nielsen Online, Nov 08). It looks like Yahoo is giving up on contextual advertising - perhaps too prematurely, given the obvious effectiveness of the model, if not Yahoo’s relative success.

Though some observers of Yahoo’s recent travails have urged it to sell its entire search business, new CEO Carol Bartz told staff on Wednesday her “gut instinct” was to hold on to it - though she still wants to weigh the pros and cons of such a move, Dow Jones says.

Bartz said she had also spoken with Microsoft CEO Steve Ballmer on the phone - Microsoft, lagging even farther in search, had previously shown interest in Yahoo’s search business so this will set tongues wagging again. Given Bartz is keen to take time getting acquainted with Yahoo, a quick deal may be unlikely, however.