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Was the Yahoo-Google Deal a Ploy To Weaken Yahoo? 82

Posted by Soulskill
from the reply-hazy-ask-again dept.
JagsLive writes with a link to a BetaNews story about a US Senator who is questioning whether the deal between Yahoo and Google was brokered with less than honorable intentions on Google's part. The advertising deal came under scrutiny from the Department of Justice recently for potential antitrust violations. The deal has now been delayed in order to allow investigators more time for evaluation. Meanwhile, rumors are circulating that Yahoo will cut as much as 20% of its workforce after an internal memo from CEO Jerry Yang called for "discipline" and said the company was "getting fit" for the long term. For their part, Google has launched a site endorsing the deal and attempting to smooth the way for its approval by providing facts and positive reactions from experts.
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Was the Yahoo-Google Deal a Ploy To Weaken Yahoo?

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  • First! (Score:3, Insightful)

    by Anonymous Coward on Saturday October 04, 2008 @09:26AM (#25255553)
    Notice how the DOJ only moves on anti-trust issues when the complaint is from a big corp (Microsoft).
    • Re: (Score:3, Interesting)

      the entire article/summary is just flamebait tbh. from TFA

      In addition, the agreement is non-exclusive, meaning Yahoo could make a similar deal with another company

      how can a non-exclusive deal weaken yahoo, they can choose to use a different provider or thier own ads at any point?

      It CAN weaken them, but so can any deal.

      • Re: (Score:3, Insightful)

        by MrNaz (730548)

        "how can a non-exclusive deal weaken yahoo"

        My further entrenching a monopoly they compete with and making it far harder for new entrants of even existing market players to enter their space?

        Oh, and why do you find it so hard to believe that Google would deliberately weaken its competitor? What if it was Microsoft brokering a similar deal with, say, Red Hat?

        Seriously, enough with the "we love Google" rubbish. They're a profit seeking company, just like any other, and they don't play fair, they just have a be

        • Re: (Score:3, Interesting)

          by DrEldarion (114072)

          Yahoo is primarily a content company nowadays. Sure, people use their search, but their other products are the popular ones. If the advertising deal were to go through and become stronger, Google would no longer be a competitor but then a partner. Both companies would have an incentive to work harder with each other, and both would benefit. It's win-win.

          Or they could take the other direction and use the new money coming in to step up development on their own competing products and try to make them actually

          • by ishobo (160209)

            Yahoo is primarily a content company nowadays.

            Yahoo has always been a content company. Their first service was a directory that was manually compiled. Search was added later, both in-house and using third parties such as Inktomi (which they bought).

        • Oh, and why do you find it so hard to believe that Google would deliberately weaken its competitor?

          Oh, I love you conspiracy nuts. You're all the same. What makes you think Google knew this would happen? Think back to the terms and situation of the deal. It was Yahoo who was in danger of being bought by Microsoft. How about we start blaming Microsoft for weakening Yahoo, since they obviously knew all this would happen.

          This deal was mutual between the two and most people were thinking it would strengthen Yah

      • Re:First! (Score:5, Informative)

        by shadow349 (1034412) on Saturday October 04, 2008 @11:12AM (#25255983)

        how can a non-exclusive deal weaken yahoo, they can choose to use a different provider or thier own ads at any point?

        Vlasic was in a non-exclusive deal with Wal-Mart:

        Vlasic Pickles was roped into a contract with Wal-Mart, in which Wal-Mart sold a 3 gallon jar of whole pickles for $2.97. Wal-Mart sold 240,000 gallons of pickles per week. But the price of the 3 gallon jar was so low, that it vastly undercut Vlasic's sales of 8 ounce and 16 ounce jars of cut pickles; further, Vlasic only made a few pennies per 3 gallon jar. With its profits tumbling, Vlasic asked Wal-Mart for the right to raise the price per 3 gallon jar to $3.49, and according to a Vlasic executive, Wal-Mart threatened that if Vlasic tried to back out of this feature of the contract, Wal-Mart would cease carrying any Vlasic product. Eventually, a Wal-Mart executive said, "Well, we've done to pickles what we did to orange juice. We've killed it"--meaning it had wiped out competitor products. Finally, it allowed Vlasic to raise prices; but in January 2001, Vlasic filed for bankruptcy. source [larouchepub.com]

        • by pikine (771084) on Saturday October 04, 2008 @11:46AM (#25256151) Journal

          Google to Yahoo is like Vlasic to Wal-Mart in your example. Google is the supplier, and Yahoo the distributor. Establishing a distribution channel is the hard part, so Wal-Mart had an upper hand to threaten the termination of the non-exclusive deal because that would significantly affect Vlasic the supplier by undercutting its product distribution.

          Yahoo in the Google ads deal already has its own distribution channel and even its own supply of ads. Yahoo is more like Wal-Mart, who carries its own Sam's Club breakfast cereal in addition to well-known brands such as Kellogg's and Quaker.

          • so Wal-Mart had an upper hand to threaten the termination of the non-exclusive deal because that would significantly affect Vlasic the supplier by undercutting its product distribution..

            "So Google had an upper hand to threaten the termination of the non-exclusive deal because that would have a significant negative affect on Yahoo revenue, and, in turn, tank their stock."

          • by wdr1 (31310) *

            Actually, I prefer to think of it this:

            Yahoo uses PHP. Google uses Python.

            -Bill

  • Honestly.
    • by KGIII (973947) *

      On a more serious note, seeing as I have no idea either, does this have anything to do with their being a Yahoo! search result button on Google now? It just showed up like a week ago here. I have been a bit curious about that.

  • by Anonymous Coward on Saturday October 04, 2008 @09:35AM (#25255585)

    Feigned buyout intentions are used occasionally by unscrupulous business folks to damage competition. Here's a scenario used often (short version):

    Potential buyer walk up to a company and says they would like to purchase it. The seller, who is interested says sure. After long negotiations, the buyer starts making demands for the deal to go through, such as: firing key employees because they "don't fit in the new company", canning key suppliers or not paying them on time to make the cash situation better, announcing to customers that there's a transaction going on, and other things to fuck up the company so that they will buy it - only under those conditions. Then, the buyer walks away. The seller is now pretty much fucked. It doesn't sound like anyone would fall for this, but after slow, very slow, negotiations for a while, and a strong desire by the seller to sell, it happens ever so slowly and after a while, the seller is afraid to bail because he's so far down the road, he keeps going along with the hopes of finishing.

    BTW, not everyone can do this. You have to actually be someone who has the resources to do this. You or I walking up to a business, no matter how small, without any track record or business history will be ignored. It's usually done by competitors who want to knock out the competition. So, don't think you can wipe out the guy who screwed you on your WoW special edition throne.

    • by fuzzyfuzzyfungus (1223518) on Saturday October 04, 2008 @09:37AM (#25255607) Journal
      Your analysis is informative and accurate. However, it is much more a description of the Microsoft/Yahoo deal(which was a potential buyout) rather than the Google/Yahoo deal(which would involve Yahoo running some AdSense on their sites).
      • Re: (Score:3, Insightful)

        by zbend (827907)
        Wasn't Yahoo the one who rejected the deal? Even after MS came back and sweetened it?
        • Re: (Score:3, Insightful)

          by HBI (604924)

          Yes, because it remained a lowball offer and would have resulted in the mass flight of whatever good employees Yahoo had anyway. Also, becoming part of Microsoft is not real high on the list of independent organizations' ambitions. Ask Bungie, for instance.

          • Re: (Score:2, Insightful)

            by Anonymous Coward

            The only one who thought the Microsoft offer was lowball is the delusional Yahoo execs. Microsoft offered a 40% premium on the market price. That's generous by any measure.

      • Re: (Score:2, Insightful)

        by Timesprout (579035)
        I think you have this the wrong way round. MS were a more than enthusiastic potential buyer, bidding far above the market value of the company. It was Yahoo who dragged their feet on the whole deal, forcing MS to continually improve their bid until Yahoo finally rejected the offer altogether. Yahoo got their share price bumped and MS got massively embarrassed.
        • Microsoft has a history of going up to companies, offering them lots of cash, dragging on negotiations, and then using their closeness to a company to create a good-enough clone while simutaneous breaking off negotiations. Even if one were to assume that Microsoft had good intentions, Yahoo would still be in the same mess because Microsoft is a convicted monopoly and clearly it's very questionable for Microsoft to use its Windows monopoly to buy a stake in the search/ad market when it has failed so badly s

          • by hairyfeet (841228)
            Well I personally agree it is a bad idea,but for different reasons. After getting tired of "Googlepedia" I have switched full time to Yahoo search and it is REALLY good,better IMHO than Google. When I type something like "Gears of War" or "The Dark Knight" into Google,the first entry is always Wikipedia,and clicking the more button only gets more Google crap like Google Earth. Whereas I type the same into Yahoo and get The official site as the first listing,and if I hit the more button(the little down tab b
    • Sounds like Mafia Tactics 101.

  • On the one hand, I find the idea that running Google ads might be a really bad idea, in the strategic sense, for Yahoo unsurprising and certainly plausible enough. It might be that Yahoo would actually make more money as a receptacle for Google ads than they would by running the same ads themselves; but that certainly isn't a vote of confidence in Yahoo's own advertising mechanism. Were Yahoo to accept such an offer, it would certainly suggest that the niche they think they can compete in is declining.

    On
  • Yes, I understand, we have to look at Google with skepticism, but I seriously don't get this.

    Therefore, critics contend that an advertiser will have an incentive to bypass Yahoo entirely and only bid for Google advertisements since an advertisement purchased with Google could be placed on both Yahoo and Google's search result pages.

    Captain Obvious to the rescue! Somebody quickly tell Yahoo, they must have overlooked this possibility when selling their adspace to Google!

    • by ozphx (1061292) on Saturday October 04, 2008 @10:00AM (#25255671) Homepage

      Shit! I dropped the keys to the Noshitmobile down the drain!

    • Re: (Score:3, Interesting)

      by Firehed (942385)

      Other than furthering Google's market cap on internet advertising and pushing them closer to a practical monopoly (there will always be competition, but none that really competes on any large scale), is that really a problem? Yahoo's page views won't change at all, and chances are that $googleAdSenseRevenue > ($yahooAdSales - $yahooAdSalesOverhead - $yahooAdPayouts). If AdSense keeps the rest of the internet afloat, why should Yahoo have to feel left out?

      Truth be told, having a "Google Custom Search" l

  • by rs79 (71822)

    MS spend tend of millions lobbying against this. They'll get something for their (considerable) money.

  • weaken it???? (Score:3, Insightful)

    by WindBourne (631190) on Saturday October 04, 2008 @09:45AM (#25255629) Journal
    WOW, MS has loads of friends in lots of low places.
  • Filth. (Score:1, Troll)

    by unity100 (970058)
    total filth.

    department of justice, the department which has had its all applicants and candidates for positions of power 'screened' by a bitch of bush administration, who later admitted to screening candidates more than FORTY times in regard to their political views, BY 'MISTAKE'. a mistake that has been done forty times.

    department of justice is a joke, and is a puppet at the hands of bush administration and whichever big buck corporation that supports it. yea, you got my meaning.
    • Flamebait ? (Score:3, Interesting)

      by unity100 (970058)
      since when truth became flamebait ?

      the woman CONFESSED in front of a senate committee for god's sakes. she said 'i made a mistake'. they asked, how many times, she said FORTY.

      leave aside being flamebait, this explains how big a joke department of justice is, and what motives it has for accusing google with undermining yahoo.

      ill wake you up -> microsoft.
  • Google competitor Microsoft in the mean-time came up with a plan that's so crazy it just might work. Instead of buying Yahoo to beat Google, they will pay people in the US $1 million per year to not use Google. A special program will monitor their web activitiy to ensure this. Danny Sullivan comments, "Absurdly expensive? It can seem that way at first, but consider the math. There's an estimated 300 million people living in the United States. If you pay each one $1 million for the next three years, that
    • by Firehed (942385)

      Someone just flunked out of Verizon Math. Even if you're using old-school billion with the milliard intermediary between 1,000,000 and 1,000,000,000,000.

      But even still, for a million bucks a year, I'd find some way to navigate using that thing that Microsoft calls a search engine.

    • by bds1986 (1268378)

      Math issues aside, what are you planning to do about the other 6 billion people on the planet who might want to access Google?

  • by Anonymous Coward on Saturday October 04, 2008 @10:10AM (#25255721)

    That really doesn't make much sense. Consider this:

    - Yahoo tested Google's AdSense instead of their own ad system a while ago.

    - Then they switched to AdSense.

    Obviously, this means that the cut they got from AdSense was higher than what they got from their own ad system, because Google's ads are better/better targeted/people pay more for AdSense/whatever other reason.

    Equally obviously, the people who run Yahoo's ad system aren't needed any more. So they get laid off. New positions will open at Google though.

    In other words, Yahoo is making *more* money now than before. That's not what I'd typically call 'weakening' a company.

    The drawbacks for Yahoo are the following:

    - Google - its main competitor - is ALSO making more money now.

    - They're dependent on their main competitor; given Google's history of mostly not being assholes, that's not as bad as being dependent on other companies though. Still, I'd call this the main drawback of the deal.

    - Google now knows everything about Yahoo's audience. Since they have the largest search engine and the Google toolbar though, they probably already knew this before.

    To wrap it up, I do not believe that this is weakening Yahoo.

    • by Firehed (942385) on Saturday October 04, 2008 @10:58AM (#25255911) Homepage

      No, but it does change their place in the market. Yahoo goes from being a search, ad, and content provider to solely a content provider (one which, like the rest of the internet, uses AdSense as its primary source of income). Not only does it strengthen both companies, but it lowers the hostility between them - Google gets to focus on search and ad targeting, and Yahoo gets to focus on gaudy design to wrap around information aggregated from other sources (again, like the rest of the internet).

      It just so happens that Yahoo, as the #1 site on the internet (not sure on the metric, probably time spent there per day, as I expect google would beat them on uniques), tends to do this a lot more effectively than anyone else, and as such is able to bring in a lot more money with AdSense than anyone else.

      However, judging by the comments here, they seem to be losing their enthusiasm! just! a! bit!

      • Re: (Score:1, Interesting)

        by Anonymous Coward
        I don't believe Yahoo is going to be exclusively running Google ads. I heard from someone who works for Yahoo that this deal helps them by supplementing their own ads in related to searching. Apparently Google has more granularity in their ability to target ads at certain groups of people. Ones that Yahoo may not have the right ads they'd be interested in to begin with.
    • by pcgabe (712924)

      - Google - its main competitor - [...]

      Google and Yahoo aren't really main competitors, anymore than Google and Microsoft are main competitors. Yahoo and Microsoft are so much more than a search engine/advertising model/free e-email.

      When I lived in Japan, for example, Yahoo was my Internet and phone provider. Google doesn't do that. Don't assume that all the Yahoo you personally experience is the extent of the company.

      • When I lived in Japan, for example, Yahoo was my Internet and phone provider
        I'm pretty sure the service that uses the name Yahoo in japan is not part of Yahoo and is just using the name under license.

  • There was a lot of technology MS wanted to 'innovate' from Yahoo, not just the advertising/search services (Yahoo Groups, Zimbra, YahooMail, a lot of PHP coders and code). Though I think MS thought Yahoo would be more desperate and be able to finagle something cheaper, but they misjudged them.

  • Google is a publicly traded company and as such it's only obligation is to it's shareholders.

    Few companies set out to do bad deeds but most won't rule them out. Google was supposed to be different. Regarding "Don't be evil"(tm), CEO Eric Schmidt recently clarified the policy saying that it was simply meant as a conversation starter.

    Here's Google from good to bad...
    +7.1 - Philanthropy
    Creating a foundation to fight poverty.
    +5.3 - Coddling staff
    Establishing on-site day care as an employe
    • by Anonymous Coward on Saturday October 04, 2008 @11:34AM (#25256103)

      Instituting keyword filters at the request of the Chinese government. Google's do no evil policy only applies to the U.S.

      This argument is, and always will be, fucking retarded.

      These are your only two options when dealing with China:
      1) Play by their rules, begin to do business there, then once you're entrenched there begin to try to make changes.
      2) Don't play by their rules, get blocked completely. A Chinese-owned search engine takes over and is completely in the pocket of the government and always will be.

      That's it. Those are your only choices. Which is the better one for the people? If you think anything but the first, you're a fucking idiot.

      • You're forgetting
        3) Use the company's profits to hire an army and puchase nuclear weapons on the black market, then overthrow the Chinese government to get the law changed.
      • by gacl (1078259)
        Money is not all there is in life. If i choose to not do business in China because i would have to support an oppressive government does not make me a fucking idiot. Let the evil ones do evil.
  • I work at Yahoo (Score:5, Informative)

    by CPE1704TKS (995414) on Saturday October 04, 2008 @10:43AM (#25255851)

    I work at Yahoo at the Mission College campus. This article is about oh, 6 months too late? We at Yahoo already figured this out, months ago.

    The day that Jerry betrayed us and announced that they were doing a "trial" test of Google ads was the nail in the coffin for most Yahoos. If you cede search and search advertising, you might as well ditch every sense of innovation and technology that the company has. And he did that. I mean, honestly, what else is there at Yahoo in terms of technology? Nothing, we become nothing more than AOL, a content provider.

    In the conference call he had with search when they first announced the "experiment", he said "I want to thank you for all the hard work that you did, and it's because of all your hard work that it allows us to try this experiment." How ridiculous was this statement? It was disgusting and I guess he didn't realize how backhanded that statement was.

    OF COURSE Google wants to keep Yahoo weak. I'm not a Microsoft fan, but at least a combined Yahoo-Microsoft would have had a chance to compete against Google and wrest some of that advertising space away, with Microsoft's deep pockets. Instead of fighting, which all the Yahoos wanted to do, we are just a bunch of snivelling bitches of Google now. By doing this, they prevented any decently sized competitor from being created, and they kept their two second-largest competitors separate and ununified. It was a brilliant move on Google's part.

    The fact is, projects like Panama and Apex failed. But if we give up, Yahoo is basically nothing, except for a bunch of perl scripts and html pages. The only chance that Yahoo had to capture some glory was to make a compelling ad system so that we could take some market share away from Google. Now, by feeding off the teat of Google, there is NO WAY that we will ever be competitive. It was truly making a deal with the devil, to increase short term revenues, and to make their earnings numbers better to save their own asses. Next is to go completely with Google ads, and then after that next after that is to drop search altogether. Why bother? Might as well go all the way, and lay everyone in MC2 off.

    Jerry Yang has completely bungled this company, and will unfortunately go down in Silicon Valley history as the worst non-fraudulent CEO ever, that ruined his own company with his own ineptitude. He should have made the deal with Microsoft. You could even tell on the devel-random list how the tone changed. Even the most die-hard Yahoos now realize what a shell of a company Yahoo has become, and are just waiting around, playing foosball and surfing the web, while we all away the great Layoff of 2008.

    • Re:I work at Yahoo (Score:5, Insightful)

      by DerekLyons (302214) <fairwater@gmail. c o m> on Saturday October 04, 2008 @11:15AM (#25255995) Homepage

      If you cede search and search advertising, you might as well ditch every sense of innovation and technology that the company has. And he did that. I mean, honestly, what else is there at Yahoo in terms of technology? Nothing, we become nothing more than AOL, a content provider.

      I don't know where you've been, but Yahoo! has been primarily a content provider, a portal, for years now. You sound like you are still living in 1999.

      • Re: (Score:3, Informative)

        by wdr1 (31310) *

        No, he must be a recent hire. In 1999, Yahoo did not do search advertising; it didn't even do search. For a long time, the Yahoo model was exactly what he described. Yahoo focused on content & best of breed technology via 3rd parties. If Altavista was the best search, AV would be used. If it was Google, then that was the search engine. Likewise, maps & so on. The rationale was that the top dog would always be changing, and by partnering instead of competing, Yahoo could always use the "best.

    • by TheLink (130905)
      I dunno about the rest of the world, but when I use Yahoo stuff, it's not because of the ads or search.

      Stuff I use? Yahoo mail, and Yahoo Messenger.

      YM is a lot more reliable than Microsoft's equivalent. Skype uses a lot more resources than I like, and often there are weird stalls when trying to send messages.

      Skype isn't plaintext like the rest, but while better than nothing, I'm not convinced their crypto is worth the minuses of skype.

      Lastly, both Microsoft and Yahoo's search services are actually OK. I'm s
    • Re:I work at Yahoo (Score:4, Interesting)

      by g2devi (898503) on Saturday October 04, 2008 @11:55AM (#25256183)

      Considering that the Yahoo-Google would never have happened if the Microsoft didn't try to buy up Yahoo, I don't see how Google can be blamed. Microsoft has a history of buying companies (E.g. Stak-r, Hotmail, etc) in order to rip out it's old technology, replace it with Microsoft technology, ultimately becoming Microsoft. Yahoo succeeded precisely because they were not Microsoft, so if Microsoft did absorb Yahoo, it would have destroyed it. Some speculate that it might have ultimately destroyed Microsoft too, since it would be a huge distraction away from their OS product line (which is the one that is actually making money).

      Neither deal was good for Yahoo (or the general public), but the stupid "hostile takeover" rules in the US gave Yahoo no other choice than to pick the lesser of two evils.

      • by perlchild (582235)

        I thought their MS OFfice product line was the really profitable one... Especially with the vista fiasco

    • Re: (Score:3, Insightful)

      by pikine (771084)

      Now, by feeding off the teat of Google, there is NO WAY that we will ever be competitive.

      Think about it as an injured Olympics athlete on life support for the moment. It's up to you whether you want to take physical therapy and resume an athletic career, or stay on the wheel chair forever.

    • by pcgabe (712924)

      Sorry, from here it sounds as if you don't know much about Yahoo or business.

      Yahoo is a lot more than search and search advertising. That is such a tiny, tiny part of Yahoo, and you make it sound like the whole kit. I understand that, as an American, your view of Yahoo may be limited. Here in the US, Google is our lord and master, and Yahoo is the has-been. In Japan, Yahoo is our lord and master (much more so than Google is in America), and Google is mostly non-existent. Do a search for YahooBB (with y

  • I can't imagine why Google and Yahoo would form a partnership in order to weaken Yahoo. That's the one thing that Yahoo management is good at.

  • Why would an advertiser bother with going to Yahoo to buy search ads, when they can go to Google and buy ads for both Yahoo and Google. This severs the relationship between Yahoo and the ad buyer and makes the buyer only go to Google. Soon, Yahoo is out of the search ad business entirely and it all goes through Google. What if Google changes rates, doesn't send the highest yielding ads to Yahoo, etc. Eventually Yahoo is at the mercy of Google, who promises to do "no evil", but perhaps "no evil" really m

    • The way Yahoo uses Google ads is to place them on pages where there aren't many Yahoo ads available for the space. So advertising with Ad Sense won't ensure that you get your ads on Yahoo! pages. You would only have the chance of it.

      So if you want to be sure your ads show up on Yahoo!, you must advertise with Yahoo, through their ad service.

  • I just decided to switch my default search engine to Yahoo for a while, but I don't see any ads on their search page.
  • Although I am a google fan, I think that this article has some relevancy. It talks about a "certain non-evil company" that offered to buy it out to prevent it from taking VC investment. After which it got cold feet, the deal fell through, and the company went under. http://news.cnet.com/8301-13505_3-10053013-16.html [cnet.com]

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