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Summary:

Google said today it’s withdrawing from the so-called Yahoo-Google advertising partnership, mostly because it was getting too much scrutiny from the federal government.

[qi:004] Perhaps the managerial bankruptcy at Yahoo was what led the beleaguered Internet company to believe that its biggest competitor, Google, would be its savior. Apparently it bought into Google’s spin about “doing no evil.” Well, today Yahoo is learning a lesson that everyone in the technology world needs to learn fast: Google is nobody’s friend. Just like Microsoft wasn’t a charity, Google, too, is capitalistic venture whose first and only goal is to stuff its coffers with cash — never mind what its leaders say publicly.

In a blog post, David Drummond, Google’s chief legal officer, announced today that the company is withdrawing from the so-called Yahoo-Google advertising partnership, mostly because it was getting too much scrutiny from the federal government.

However, after four months of review, including discussions of various possible changes to the agreement, it’s clear that government regulators and some advertisers continue to have concerns about the agreement. Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners. That wouldn’t have been in the long-term interests of Google or our users, so we have decided to end the agreement.

Despite those innocent-sounding words, deep down Google has to be secretly rejoicing over freezing Yahoo into inactivity. Did anyone actually believe that this deal was going to sail through? I sure didn’t. But apparently, in their desire to save themselves from Microsoft, Yahoo forgot that the guys in Mountain View, Calif., only play hardball.

At the time of the deal, I pointed out that, “[T]he U.S. government investigation is going to entangle Yahoo in underwater weeds of uncertainty. Google, on the other hand, will be victorious in defeat — they would have frozen Yahoo into inaction for awhile.” Yahoo “is shooting itself in the face with this deal,” I said then, likening the deal to knowing that “your spouse is going to divorce you while you’re standing in the aisle, waiting for the priest.”

Where does it leave Yahoo? That answer will come in a later after I return from the Web 2.0 conference.

Update: Statement from US Department of Justice:

Yahoo! Inc. and Google Inc. abandoned their advertising agreement after the Department of Justice informed the companies that it would file an antitrust lawsuit to block the implementation of the agreement. The Department said that, if implemented, the agreement between these two companies accounting for 90 percent or more of each relevant market would likely harm competition in the markets for Internet search advertising and Internet search syndication.

“The companies’ decision to abandon their agreement eliminates the competitive concerns identified during our investigation and eliminates the need to file an enforcement action,” said Thomas O. Barnett, Assistant Attorney General in charge of the Department’s Antitrust Division. “The arrangement likely would have denied consumers the benefits of competition –lower prices, better service and greater innovation.”

  1. Will this be the last straw and lead to a change in leadership at Yahoo?

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  2. The sole purpose of this shenanigan was to weaken the hand of Microsoft.

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  3. @Chetan

    Or at least that’s what Yang thought. This was a dumb … make the ultra dumb move on part of Yahoo.

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  4. Why is this a surprise? 80% market share was always going to be a problem. Look at this development as an opportunity to profit from yahoo by buying shares or options on the chance of a potential takeover as discussed here ( http://www.savingtoinvest.com/2008/11/yahoo-takeover-trade-as-google.html ). Just look at what the market and investors are saying and the stock price reaction (up). Yahoo’s days as an independent company are running out.

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  5. [...] self-delusion emanating from the comments of this nice man. Perhaps that explains his faith in the now scuttled Google-Yahoo advertising deal. “We’re disappointed with that,” he said when asked about it by Battelle. “It [...]

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  6. Google does no evil… to its shareholders… ;)

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  7. Again straight to the point Om. Particularly: “Freezing Yahoo! into inactivity”.

    Shame Yahoo! allowed Google to mislead them so much. It seems some gut feeling and basic strategic planning is seriously missing from the team at Yahoo!?! Are they really so desperate? Maybe they need some executives that have lived with no money, and have looked a liar (Google) in the eye, rather than focussing on academics that are good with numbers or paperwork? This way they could deal as businessmen, rather than tech legends. Maybe they need someone like Alan Sugar to mentor them into reality?

    It cannot amount to a healthy market as Google continues to increase it’s monopoly on search, and play evil games like this. Well they were the ones to tip the market, and Yahoo! still went begging. Tragic.

    @ Lex Luthor – interesting take on the other side of the coin. A monopoly is surely not healthy for shareholders in the long term?

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  8. [...] look like a bargain, and on Wednesday, Yang even said he’d do a deal with Microsoft after a search partnership with Google fell through. The question now becomes whether Yahoo would lower itself to a search partnership [...]

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  9. [...] can earn some money Saltar a Comentarios Podría dedicarme a darle un poco de caña a Yahoo por creerse la “crap” de Google, pero me sentiría como pateando un perro [...]

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