Google Pulls Out of Yahoo Partnership
Google, online search advertising giant says antitrust battle with government risked loss of business, retreats from deal with struggling peer, Yahoo.
Google Inc. and Yahoo Inc. have scrapped their Internet advertising partnership, abandoning attempts to overcome the objections of antitrust regulators and customers who believed the alliance would give Google too much power over online commerce.
The retreat announced Wednesday represented another setback for Yahoo (YHOO, Fortune 500), which had been counting on the Google (GOOG, Fortune 500) deal to boost its annual revenue by $800 million and placate shareholders still incensed by management’s decision to reject a $47.5 billion takeover bid from Microsoft Corp. (MSFT, Fortune 500) nearly six months ago.
Without Google’s help, Yahoo now may feel more pressure to renew talks with Microsoft and ultimately sell for a price well below the $33 per share that Microsoft offered in May. Yahoo shares traded Wednesday morning at just $13.67, up 2.4% on the day.
Surrendering the chance to sell ads on Yahoo’s popular Web site won’t be a significant financial blow for Google, which already runs the Internet’s largest and most prosperous advertising network.
But the capitulation marks a rare comedown for Google, which had been insisting for more than four months that the Internet would be a better place to do business if it were allowed to work with Yahoo.
“We’re of course disappointed that this deal won’t be moving ahead,” David Drummond, Google’s chief legal officer, wrote on a company blog. “But we’re not going to let the prospect of a lengthy legal battle distract us from our core mission. That would be like trying to drive down the road of innovation with the parking brake on.”
Google’s management took a strategic risk by agreeing to the Yahoo partnership in June, knowing the move would increase the government’s scrutiny of Google’s market power. Even though it is now walking away empty-handed, Google figures to remain in regulators’ sights as it tries to expand.
“For the first time, Google has run into real opposition to its marketplace goals,” said Jeff Chester, executive director of the Center for Digital Democracy, a consumer advocacy group. “Google is aware that its aggressive moves in the online advertising business are potentially contributing to damaging its brand. The perception of Google has changed.”
Most, if not all of us, have already heard the tales of Google acquiring Yahoo. And you also know that Yahoo is undeniably struggling these days due to this world financial crisis and they even ended up in vast lay offs. Well, according to CNN.com– as quoted above, the partnership of Google and Yahoo, two Internet giants, could no longer be possible.
Well does this mean an apparent victory for Microsoft? Well, that is meant for another post.
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