Google – Yahoo! Ad Deal Will Never Take Off
Google – Yahoo! Ad Deal Will Never Take OffNov 07 2008 - Business, Google, PPC - Farhad Divecha
In June this year, Google and Yahoo! had announced a paid search deal, which had raised a lot of eyebrows and objections. The deal has now been officially called off due to opposition from government anti-trust officials.
Microsoft and several advertisers and publishers had objected to this deal, citing anti-trust laws and raising concerns about the possible rise in ad prices for advertisers.
At the time, both Google and Yahoo! had maintained that this was neither a merger nor an acquisition, and hence there was no question of violating the anti-trust laws. They also said that ad prices would continue to be determined by the usual auction process, so there was no need to worry about increased ad rates.
Their stand obviously did not pacify their opponents, who continued to lobby against the deal, and eventually, in September, the Justice Department appointed Sanford Litvack, the ex-Vice-Chairman, of Walt Disney Co. to look into the matter and prepare an anti-trust case if applicable. This development not only generated a lot of publicity regarding the issue, but also caused the stock prices of Google to fall.
Even though Google and Yahoo! maintained that their deal was not subject to government approval, they decided to cooperate voluntarily with the Justice Department. They even decided to put the deal on hold for a while. The two companies have been holding meetings with the Justice department in this regard but so far they have not reached any solution. One of the major stumbling blocks here is the reluctance of these firms to sign a consent decree, stating the terms of the partnership. Agreeing to sign such a decree would, in effect, mean agreeing to be constantly monitored by a judge, which they would not like for obvious reasons.
In their withdrawal statement Google said that a protracted legal battle and the possible estrangement of relationships with other partners were the main factors influencing their decision to end their relationship with Yahoo!
Google has seen a further fall in their share prices, but contrary to expectations, Yahoo! shares jumped up. The rise in YHOO stock could be due to announcements from Microsoft and Yahoo! saying they were now open to merger talks as well as Wall Street’s expectation that with Google out of the way, Microsoft is bound to step in and acquire Yahoo!