Yesterday Google put an end to the advertisement agreement with Yahoo! that both companies announced in April. Google blamed the government regulators and some advertisers who had concerns on the deal. And who wouldn’t? The two major players in online advertisement were reaching an agreement to cooperate on search advertisement. Anyone smelling monopoly?
Yahoo! and Google deal back in April was meant to stop the Microhoo acquisition. Google was quick to give a hand to Yahoo! to “save” them from being absorbed by evil Microsoft. And it worked. Specially for Google. They avoided a Microhoo that would have been a stronger contender, and they made Yahoo! publicly concede defeat in online ads by agreeing to place Google ads in Yahoo!’s searches.
Now Google ends the agreement, which “surprisingly” raises concerns on regulators, and leaves Yahoo! defeated and weaker after six months of inaction waiting for a deal that is now trashed and has trashed Jerry Yang’s credibility with Yahoo!’s shareholders that have seen the share drop to less than $13 after refusing Microsoft’s $33 bid.
Did Google ever believe that the deal would go through? Google has won anyway. Sounds Machiavellian? Anyone remembers the spectrum auction in April where Google forced Verizon and AT&T to pay more than $4.6 Bn to secure the “openness” of the network? Not to be evil, these guys play tough.
Still Mr. Yang can not be blamed for the financial crisis that has taken a big chunk of Yahoo!’s market capitalization since the $33 bid. As the graphic above shows, Yahoo! stock is not performing any worse than Apple or Google are in 2008. Jerry Yang’s decisions to reject Microsoft bid and to pursue a devil’s deal with Google have not been well received by shareholders. The good news is Yahoo! users are not going to stop using Yahoo! anytime soon. And for us users, it is better to have Google, Microsoft and Yahoo! than only Google and Microhoo. Competition is what drives innovation, and three is a better number of competitors than two.