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Google Kills Yahoo Ad Deal 79

Posted by samzenpus
from the sleep-with-the-fishes dept.
mytrip writes "Google has pulled the plug on on a search-ad partnership with Yahoo that would have given Yahoo major new revenue but that raised antitrust concerns. 'After four months of review, including discussions of various possible changes to the agreement, it's clear that government regulators and some advertisers continue to have concerns about the agreement,' said David Drummond, Google's chief legal officer in a blog post Wednesday."
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Google Kills Yahoo Ad Deal

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  • by fuzzyfuzzyfungus (1223518) on Thursday November 06, 2008 @01:56AM (#25657147) Journal
    I'm not a huge Google booster, you won't see much more than spamtrap stuff in any of my Gmail accounts; but I don't really understand why this deal is seen as so serious. Yahoo has a fairly strong set of web properties, but mediocre advertising and search. Running Google ads sure isn't a long term vote of confidence in their own ad department; but Yahoo's ad space is quite valuable, and presumably they believe that they can do better as a site operator selling ad space. I'm not sure whether they are right or not; but it is at least plausible.

    Am I missing something about this, or did the deal get shot down by some sort of outside pressure? (Is MS still involved in some corporate version of "It's complicated" here?)
    • DOJ & antitrust (Score:5, Informative)

      by mattytee (1395955) on Thursday November 06, 2008 @02:02AM (#25657197) Homepage
      Outside pressure is unlikely -- though TFA mentions the association of national advertisers wrote the DOJ a letter, here's how it works:

      There's an index called Herfindahl-Hirschmann, where the percentage of the market share for all companies in the market (here, they probably ran it for advertising and search) is squared. If the sum of the squares is above 1700, the DOJ *automatically* threatens/files an antitrust suit.

      Hopefully that's semi-clear. It's part of basic microeconomics if you need a better explanation.
      • Clear enough. Herfindahl-Hirschmann should be enough for me to pull up the relevant literature. Thanks.
  • What This Means (Score:5, Informative)

    by rsmith-mac (639075) on Thursday November 06, 2008 @02:07AM (#25657225)

    There are two very interesting things about Google pulling out:

    1) Google is now big enough to attract serious government anti-trust attention. It just immensely harder for them to do anything big that would benefit their core business (advertising) or anything external where they could throw their weight around. The message from the government seems to be that they're going to start treating Google as a de-facto monopoly in search/advertising, which means they're going to try to keep Google from using that monopoly in other markets.* I don't think they're the kind of market threat that the government makes them out to be, but left unchecked they may get there one day soon.

    2) Yahoo is fucked. Yang should have sold it to Microsoft when he had the chance; they're probably not going to be able to stand on their own now, and whoever ends up being their suitor won't pay nearly as much as MS's best offer.

    * Not that the DoJ is particularly effective here. See: Microsoft

    • More economics terms (Score:5, Informative)

      by mattytee (1395955) on Thursday November 06, 2008 @02:21AM (#25657323) Homepage
      I really dig microeconomics, if you can't tell.

      Technically speaking, Google's an oligopolist rather than a monopolist. Oligopoly is a market in which a few large firms control a market with a high concentration ratio (the Herfindahl-Hirschmann Index I mentioned above) and high barriers to entry (in this case, the R&D and advertising that would be required to compete).

      Consider the barriers in terms of the fact that Microsoft, with all its money and brand recognition, can't compete with Google in search or advertising. That's partly an issue of quality (real or perceived), as we geeks know, but it does make clear that it's not a "hit and run" (contestable) market where many small firms can jump in and compete.
      • Re: (Score:1, Troll)

        Google's privileged position and the wealth it has provided them, I would argue, makes them have a special duty to society to CONTINUE to provide us with free, effective search engines. If Google were to suddenly require payment for their search service or were to even, for some inexplicable reason, decide to close up shop tomorrow, the federal government should step in and ensure they remain doing their duty until at least some real competition arises, or the government could just nationalize it if needed

        • by walshy007 (906710) on Thursday November 06, 2008 @03:10AM (#25657637)

          so wait a second.. you think that when a company becomes very well off, they are obliged to give free services to whoever asks it of them?

          I'm not sure what your smoking, but it must be good, google, like all capitalist companies, follow the almighty dollar.

          or were to even, for some inexplicable reason, decide to close up shop tomorrow, the federal government should step in and ensure they remain doing their duty

          so if company x decides to close down, the government should have the power to _force_ the company to still provide service? ... right, I like your choice of words 'doing their duty' makes it sound almost like they are an army deserter by not doing business.

          • Re: (Score:2, Interesting)

            by Ed Avis (5917)

            I think the other poster is making a snarky point about the rescue of the banking system, and the support and pressure given by governments to banks across the world to make sure they continue lending.

          • Re: (Score:1, Flamebait)

            No, I'm just practicing my rhetoric to fit in with the upcoming Obama presidency, so I'm not left behind the times.

        • Re: (Score:2, Interesting)

          by mattytee (1395955)

          the government could just nationalize it if needed.

          Recent events actually make this seem likely. Even three months ago, I would have scoffed at the idea of the US government getting into the economy in that fashion.

          But far likelier is the thing that kills most companies with fat market share -- new technology that renders Google's business model obsolete (the same way Google is killing newspapers), and/or the cost setup changing markedly (either makes it harder for Google to profit or easier for other firms to profit if they join the market).

        • by homer_s (799572)
          Google's privileged position and the wealth it has provided them, I would argue, makes them have a special duty to society to CONTINUE to provide us with free, effective search engines.

          So you're saying that if someone works hard and is successful, society automatically has a claim on that? Looks like everyone will have to get used to that kind of thinking for the next few years (just like we did in the last few years).
          • by smoker2 (750216)
            So you're saying that if the water company suddenly decides to shut up shop, we just do without water until somebody can be found to take over the business (providing all their own infrastructure) ?
            Get a fucking clue. Should microsoft be allowed to shut up shop, simultaneously sending a kill command to every computer running their OS ?
            It's nothing to do with punishing those who are successful, but protecting those who have come to depend on the only game in town. There is a reason those banks got bailed out
            • by homer_s (799572)
              So all I have to do to have a claim on your assets is to become utterly dependent on you?
              And stop swearing, you fucking cunt.
            • Re: (Score:2, Insightful)

              by Shaltenn (1031884)
              I don't know how you can even attempt to draw a parallel to that.

              Comparing Google functionality to water. That's ridiculous. Water is fundamentally necessary to life. Google is not.

              Did we manage before Google came around? You bet.
              Would we cope if Google closed their doors tomorrow morning? You bet.

              [offtopic]
              Microsoft, like any other company, does not REALLY have an obligation to customers, they can close whenever they want. They shouldn't be able to disable software that you have PAID for with
              • by zr (19885)

                he's not thinking naive, he's thinking like a communist. thats how they started, than "rob the robbers" (the capitalist pigs) and so on. didnt end too well, i should know, i was there.

                the government has no business meddling with private business.

                the job of the government is to keep level playing field in the market, police the streets and maintain army to fend off aggression. thats it. we can manage the rest thank you very much.

        • by ccccc (888353)
          Don't be ridiculous. Having run a successful business does not render the Google Corporation and its employees slaves of the state, no matter how much that inconveniences me and the rest of the world. If they decided to close shop five minutes from now, I don't see any defensible reason they should not be allowed to.

          They are not the police force or the hospital; if they decide to end their business, switching to MSN or Yahoo will not cause any grave harm to you.
      • I don't claim to be well versed in microeconomics, but don't you need multiple large firms with equally large shares for an Oligopoly? I think the traditional example here is Coke & PepsiCo. The way the online advertising market is structured, Google has the lion's share of it. There are other large firms in it (e.g. Microsoft) but they don't even begin to have a share of the market similar to Google's.
      • by wisty (1335733)
        It doesn't surprise me that that Microsoft can't compete. Microsoft hates the web because they make all their money on desktop applications. .doc and .xls lock-in is more important to Microsoft than the win32 API, because businesses use them and don't pirate (unlike gamers, who would pirate windows just to get directx). If everything happens on the web (i.e. companies start putting their work in html and csv format), then Office will go into a tailspin. Lots of companies make money on advertising, but not e
    • Re: (Score:3, Interesting)

      by isBandGeek() (1369017)
      It's extremely obvious with the 20/20 vision hindsight affords us that Yahoo should have taken Microsoft's offer. But the real question is: with the information that CEO Yang had at the time, was his decision reasonable?
      • Re:What This Means (Score:5, Insightful)

        by tsotha (720379) on Thursday November 06, 2008 @02:49AM (#25657495)

        Oh my God, no it wasn't. Yang was treating Yahoo like it was still his company, when in fact it belongs to the shareholders. There was no reasonable way to run Yahoo's numbers and think the stock would be worth what Microsoft was paying within any reasonable time frame.

        Actually, this is something of a coup by Google. They screwed both Microsoft and Yahoo without spending a dime.

        • by Wee (17189)

          That was my reaction as well. When MS made the offer, Google screams "Hey! Antitrust! Too much market power!" Then they offer to do ads and stuff for Yahoo in order to fend off MS. That torpedoes the MS-Yahoo deal, with Yang thinking the Google help will keep the creaking hulk alive. I mean, the stock's at $25/share, MS is only offering $31/share. That's not much headroom to make up for, is it? Now that we have Google's search that actually works and ads that are easy to buy? Stock drops like a roc

          • by elrous0 (869638) *

            Of course Yahoo employees are going to leave. With such a great job market in California right now, it will be easy for them to.

            Oh, wait.

      • It was highly obvious at the time: 1) Yahoo! stock had been in decline for some time. 2) Google was kicking the shit out of it. 3) The offer from Microsoft was substantially above the market price. You have to have really, really good reasons to ignore a large, certain profit. Yang didn't have any.
    • Re: (Score:2, Informative)

      by Anonymous Coward

      So, by preventing this deal, the DOJ has all but guaranteed Yahoo's demise, thus leaving only two significant players to split the remaining pie, who will probably split the void Yahoo leaves up about equally, so Google will get even more market share than it does now. Alternatively, in the best case, MS still buys Yahoo, resulting in a closer-to-equal market share split, but still with only two legitimate players.

      Way to go DOJ, thanks for looking out for us.

      • So DOJ can prevent a deal at the expense (read:death) of another company? Don't they have to give up draft picks or something? Oh wait, this is /., that analogy will go nowhere...

      • by iamapizza (1312801) on Thursday November 06, 2008 @03:28AM (#25657729)
        The DoJ isn't partial or biased. They are 'doing their job' by ensuring that a 'threatening' (note the quotes) monopoly doesn't form. In either case, on the flip side, they represent a tiny form of government regulation in a free capitalistic market - so whether you're a Microsoft-hater or a Google-brownnoser, try looking at the real issue here.

        Google was about to enter a deal with Yahoo that may have caused a monopoly of sorts (and infested the place with IFRAMEs, how can you not hate IFRAMEs?). The DoJ said they were worried about it. Google pulled out. End of. They saved money instead of waiting for the court case and going through years of appeals and spending millions/billions.
        • Re: (Score:1, Insightful)

          by Anonymous Coward

          They are 'doing their job' by ensuring that a 'threatening' (note the quotes) monopoly doesn't form.

          I just think they aren't looking at the big picture, looking at one outcome and missing the alternatives. "Never ascribe to malice..." and all that. By threatening to investigate, they are guaranteeing the competitive landscape gets *worse*. Which of the following is a better market share distribution?
          (a) 65 25 10
          (b) 70 20 10
          (c) 85 15
          (d) 70 30

          (a) is basically what we have now. Unfortunately it doesn't look like Yahoo can survive purely on its own, so this is no longer an option. (b) is what could happe

    • There are very convincing arguments indicating Microsoft may never have intended to buy Yahoo:

      In it, it appears that Yahoo is a loss-loss acquisition for Microsoft. It further appear very unlikely that a Microsoft acquisition can be accepted by antitrust authorities.

      In that article, Microsoft have so far obtained the first part of what they aimed for; changing the board to a Microsoft friendly board, now comes step two which is not buying yahoo but making a deal to get access to the '361 patent', which the

      • by hairyfeet (841228)

        Here [uspto.gov] is a link to the '361 patent the above poster mentioned,and reading it one could see why MSFT might covet it. That said,I always thought MSFT going after yahoo search was just to throw everyone off what they really wanted,which I think is Yahoo mail. While I personally think Yahoo search is a LOT better than Google,thanks to the "more" tab which will give you relevant queries connected to the original search,I just can't believe MSFT would pay that much for it. And they know that buying outright will

    • by rtb61 (674572)

      What you meant to say, was that a google and yahoo partnership is big enough to create an anti-trust partnership. Google on it's own, while creating a successful marketing illusion, is not really all that big and lacks a wide range of web portal elements. Yahoo represents a broad web portal and it's share price much more realistically matches it's revenue base.

      What this does is really point out how much of a failure M$ has been with MSN, while a part google yahoo partnership has antitrust overtones a ful

    • by elrous0 (869638) *
      Yeah, but Yang stood up to THE MAN! His shareholders should always take second place to his own personal dislike for MS.
  • It's a good thing my government are protecting my right to competing internet search engines; Google has a very special place in society now given their success and they have a social duty--an obligation if you will--to provide society with quick and effective searches. A monopoly at this point would be bad for society, even though a new search engine could always spring up, it would hurt us too much in the short-term and be anathema to our right to access to Google's search servers. We've made people at

    • by walshy007 (906710) on Thursday November 06, 2008 @03:17AM (#25657677)

      Google has a very special place in society now given their success and they have a social duty--an obligation if you will--to provide society with quick and effective searches.

      The only duty google has is to please it's shareholders, if you were to 'redistribute' the wealth of large companies that annoy you like you say, well that isn't exactly encouraging for people to try to form successful companies is it, what with them putting in the work and collectively everyone else getting the profit.

      to our right to access to Google's search servers.

      yes, because you have an inalienable human right to access corporately owned servers, you see.... surely even you must see how fallacious this is.

      • by dnwq (910646)
        Nonetheless, this does raise the interesting question of what happens if Google - or some future similar big company - decides to screw around with its free services. Not what Slashdot's armchair libertarians think should happen, mind you, but what might actually happen.

        We have companies that are "too big to fail". Is it possible that there can be services too influential to leave without intervention?
      • by smoker2 (750216)
        If a large company becomes that way by NOT charging for access to some of its products, then most certainly it should not be allowed to just turn it off on a whim. Should gmail suddenly get turned off because they offer it for free ? Is that in the shareholders best interest ?
        I don't see where redistribution of wealth is involved here. The search is currently free - maintaining that status requires no redistribution of anything. And I take no financial profit from using google for search. What about all the
        • Re: (Score:3, Insightful)

          by ScentCone (795499)
          Should gmail suddenly get turned off because they offer it for free ? Is that in the shareholders best interest ?

          What if it is? What if it isn't, and it's a mistake? So what. You're proposing that the government should rule on what's in a given company's shareholders' best interests?

          then providing free searches is fundamental to my success

          And business models never change? What, do you still have your job at the telegraph office, bicycling Western Union paper scraps around town? Businesses evolve, a
          • by smoker2 (750216)

            You're proposing that the government should rule on what's in a given company's shareholders' best interests?

            No I'm not. I'm suggesting that if a de facto monopoly shuts down its service there must be continuity of service. Do you suggest we shut the web down for a few months while another company spools up to fill the void ?
            If they want to change their business model - fine. But as a monopoly they should not be allowed to just fuck off and leave us all in the shit. There should be contingencies to deal wi

            • by ScentCone (795499)
              if a de facto monopoly shuts down its service there must be continuity of service

              Why? There is only one walk-up ice cream store in my neighborhood. They own that market. There is no competition. Should they be forced to stay in business if they don't feel like doing it any more, or want to change how they do what they do?

              What takes precedence, private shareholders or the health of the entire nations web services?

              Gee... maybe if you're betting your own entire ability to make a living on whether or n
      • The only duty google has is to please it's shareholders, if you were to 'redistribute' the wealth of large companies that annoy you like you say, well that isn't exactly encouraging for people to try to form successful companies is it, what with them putting in the work and collectively everyone else getting the profit.

        Just to clarify something, Google has a duty to it's consumers as well. The two consumer groups it has are:

        1) Searchers. This is the obvious one, but what's less obvious is that they aren't

  • It should be "Google kills Yahoo".
    • by elrous0 (869638) *
      To which Balmer should respond, "Sure Jerry. We'll offer you a fraction of what we offered to you a few months ago when you told us to go to hell. And we'll only offer *that* if part of the package includes you giving my shoes an on-camera polishing with your tongue."
  • by rastoboy29 (807168) on Thursday November 06, 2008 @03:58AM (#25657881) Homepage
    Yahoo is fine, if they are given time by their shareholders.  And a new leader.  Yahoo has failed to innovate significantly in years.  For example, I know I started using Yahoo Maps in the late nineties.  By 2005 it was exactly the same, but now Google Maps was on the scene and had the cool ajax interface, satellite imagery overlays, and other cool stuff.  Yahoo started rolling that stuff out like, last year.

    They do have an extended userbase, and there is value in that, but they are right back where they found their stock price 8 years ago for a reason--a failure to innovate in an industry that values effective innovation over all things.  I mean, it takes them several years to copy what Google did years ago...new management is needed (but not MS!  that would be a disaster for both companies).
    • They do need innovations. Sadly, they are not going to get them because their best ppl have been leaving. If Yang was serious about innovation, he would set up an X prize approach for ideas to come from OUTSIDE. They would then fund those ppl with great ideas, or even make offers to come onboard. The hard part is that the judges on it, can NOT have interaction with regular company, nor can they use the ideas without it winning.
    • ...new management is needed (but not MS! that would be a disaster for both companies).

      The only downside I am seeing here is that we would lose Yahoo.

    • by pimpimpim (811140)
      Not only a lack of innovation, quality has been decreasing for a long time even. I was using yahoo groups with a group of people for a while, but its calendar notifications and complicated login structure became completely messy. I don't think any of us still knows how to log in there. A shame, because it was pretty good in the beginning.
  • It could just be because of the "Google is not evil" thing. They want to maintain that image. They are doing the responsible thing and promoting competition in the market. Any company that is big enough to run amock in anti-trust law is probably also greedy enough to go ahead with the deal. When the DOJ comes knocking they'll just take the ass pounding in court for a few years until the DOJ runs low on funds and drops it. In the meantime the company is still making far more profit as a result of the de

  • I heard a yahoo radio ad yesterday. It was promoting Yahoo's safer search results compared to Google because they've teamed with McAfee anti virus and spam.

    I was slightly surprised as I can't recall the last time I heard the "Yahooooo". Let alone hear anyone suggest that McAfee is good.

  • thats what exactly it is. microsoft has been way too chummy with neocons in the last 8 years, who were staffing up DOJ with their own supporters only. remember, in a senate hearing a hag admitted that she has screened the DOJ applicants FORTY times for their political views, 'by mistake'.

    when microsoft bids failed, and microsoft chose not to go for a hostile takeover to prevent damaging its public image, for some reason doj started looking into the google-yahoo deal out of 'concerns of anti trust'. how c
    • when microsoft bids failed, and microsoft chose not to go for a hostile takeover to prevent damaging its public image, for some reason doj started looking into the google-yahoo deal out of 'concerns of anti trust'. how convenient, how timely, what a coincidence.

      Consider that the Google-Yahoo deal didn't exist until after the MS bids failed.

    • by FooGoo (98336)
      What kind of drugs does one have to abuse and for how long in order to see the world the way you see it? Did it start in the womb or was it something you recently adopted?
  • Google is getting increasingly influential over how the world gets access to media. There's an analysis here about how the beta launch of the Chrome browser generated 450,000 independent blogs over the course of 60 days. Google Chrome is also the top sponsored link for searches on "browser" or "web browser." On the organic search side, Google Chrome ranks near the top on Google Search, Google Blog search, and Google news.

    http://is.gd/6mJk [is.gd]

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