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Yahoo's fate unclear as Google abandons ad deal
(Agencies)
Updated: 2008-11-06 08:07 "The Department of Justice's finding is significant for advertisers, publishers and consumers, who voiced overwhelming concern about this illegal deal to law enforcement and policymakers," Brad Smith, Microsoft senior vice president and general counsel, said in a statement. The US Justice Department signaled it was considering a challenge to the deal in September when it hired veteran antitrust lawyer Sanford Litvack to review the case. Google and Yahoo responded with "discussions of various possible changes to the agreement," Drummond wrote on the Google blog. Those changes included proposals to limit the length of the agreement and to cap the search advertising revenue that Yahoo could generate from the deal. Those concessions weren't enough to satisfy the regulators, however. Now that Google is out of the picture, Yahoo's Yang will have to find another way to accelerate his company's growth and boost a stock price that has been cut in half since he became CEO in June 2007. If nothing else, Yang appears to have a bigger incentive to join forces with another tarnished Internet star, AOL. Yahoo has been discussing a possible acquisition with AOL's corporate parent, Time Warner Inc., for months. Google also owns a 5 percent stake in AOL. But many Yahoo shareholders, including new board member Carl Icahn, have indicated they think the Sunnyvale, Calif.-based company should try to lure Microsoft back to the negotiating table. Most industry analysts still believe Microsoft will make another run at Yahoo, particularly now that the company can be bought at a fraction of the May offer. Instead of buying Yahoo in its entirety, Microsoft might want just Yahoo's search engine, which ranks a distant second in usage behind Google's. Microsoft attempted to buy Yahoo's search engine shortly before the Google partnership was reached. Under the terms of the deal, Yahoo would have drawn on Google's superior technology for some of the ads shown alongside the search results on its Web site. Yahoo would have pocketed most of the revenue generated from Google's ads. The concept didn't pan out because Google and Yahoo combined would have controlled more 90 percent of the US search advertising market, according to the Justice Department's analysis. Microsoft and the Association of National Advertisers, among others, argued the arrangement would enable Google to gradually increase advertising prices and exert more control over the flow of e-commerce. Google and Yahoo said the advertisers' complaints were misguided because search ad rates are set through an auction-style system. What's more, the partnership was supposed to be non-exclusive, leaving an opening for others to vie to sell ads on Yahoo's Web site -- including Microsoft. |
