Google abandons Yahoo ad deal
By John Lister
Google has confirmed it is abandoning its controversial ad-sharing deal with Yahoo. The news brings into question Yahoo’s future and raises the prospect of a full takeover by Microsoft.
According to David Drummond, Google’s legal head:
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.
The deal would have involved ads sold by Google appearing among Yahoo’s search results. However, Google sources said last week that the firm would walk away rather than accept government restrictions it felt too cumbersome. Even with this threat, Google and Yahoo were reportedly still willing to scale back the deal, for example limiting Yahoo to getting 25 percent of its total ad revenue through the system.
It appears this was not enough for regulators, who’d talked of keeping the deal under permanent review. Indeed, the Department of Justice’s comments today suggest it may have objected to the principle of the agreement as much as the fine detail:
Google and Yahoo! would have become collaborators rather than competitors for a significant portion of their search advertising businesses, materially reducing important competitive rivalry between the two companies… The arrangement likely would have denied consumers the benefits of competition: lower prices, better service and greater innovation.
It’s interesting to note Drummond mentioned advertisers in his comments. Trade groups worldwide had condemned the deal as anti-competitive and, while it’s unlikely they’d have gone as far as a full-blown boycott, it’s apparent that advertisers had some influence on Google.
Unless Yahoo can find another way to increase ad revenues, it looks an even likelier target for a Microsoft takeover. Yahoo shares are currently valued around the $14 mark, far below the $33 per share Microsoft offered in a takeover bid six months ago.
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