Yahoo! has finally put an end to the old-school “paid inclusion” programs that blurred the lines between its search engine and its search advertising. This has been an issue for the search engine for some years now and has affected some of its’ potential search marketing campaigns.

During the company’s quarterly earnings call this afternoon, Yahoo! CFO Tim Morse confirmed that at the end of the year, the company will destroy its Search Submit program, under which marketing types pay to submit URLs for inclusion in Yahoo!’s search rankings rather than waiting around for them to be picked up by unbiased crawlers. This controversial issue has meant that the paid search advertisements have been left redundant by some larger firms who have opted to pay the fee to reach the top of the organic search results. There is also an ethical side to this, which means that the organic search results have been altered and the Yahoo! algorithm bypassed in order to promote the search submit firms.

“We think this is a change to help us improve the overall health of our marketplace on an ongoing basis, so it helps us to do it,” Morse said. He hopes that abandoning this method of revenue will show that Yahoo! is taking a more ethical stance to its search marketing and will improve its reputation within the industry.

Morse declined to say exactly how much revenue the company would lose in cutting the program. “We’re not going to breakout the sales or profitability from our various smaller programs here,” he said. But judging from other comments, it seems the program was pulling in noticeable amount of money. This is not surprising, but does doesn’t signal a good approach to any potential search marketing company.

With Search Submit Basic, users can submit a URL for a flat fee of $49 per year (with a limit of five URLs per domain). And with Search Submit Pro, larger businesses can submit URLs in bunches and pay for them on a cost-per-click basis. Pro users are required to spend at least $5000 a month for at least 1000 URLs. This eliminates the competition somewhat and does not signal a competitive, fair market.

Yahoo!’s decision to kill the program may be linked to its pending search deal with Microsoft. With Microsoft slated to take over Yahoo!’s underlying search engine technology, Yahoo! will no longer have the power to offer paid inclusion. During today’s conference call, Morse said that Yahoo! still expects the Microsoft deal to close early next year. This will change the search industry forever and will potentially lead to substantial competition for the leader in the market Google.

Yahoo! will hopefully now continue its approach towards ethical search marketing.