Google withdraws from Yahoo ad partnership. Will Microsoft rebid?

Google withdraws from Yahoo ad partnership. Will Microsoft rebid?

Summary: Google announced on November 5 that it has decided to back out of its ad partnership with Yahoo rather than defend it in court. Will that make Yahoo any more open to a buyout by Microsoft of Yahoo's search business?

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Google announced on November 5 that it has decided to back out of its proposed ad partnership with Yahoo rather than defend it in court.

Yahoo acknowledged the end of the deal in a press release:

Yahoo "today announced that Google has terminated the advertising services agreement the companies announced in June. Yahoo! continues to believe in the benefits of the agreement and is disappointed that Google has elected to withdraw from the agreement rather than defend it in court. Google notified Yahoo! of its refusal to move forward with implementation of the agreement following indication from the Department of Justice that it would seek to block it, despite Yahoo!'s proposed revisions to address the DOJ's concerns."

So much for the deal that Yahoo characterized as offering the company far more opportunities than any kind of a search buyout by Microsoft....

(I'm not pretending Microsoft didn't work behind the scenes to get the Google-Yahoo deal tangled up in antitrust-colored bureaucratic knots. As Google has done to Microsoft, so Microsoft does back to Google.)

One new question on Microsoft watchers' minds will likely be whether the dissolution of the Google-Yahoo ad partnership means Yahoo management might rethink selling its search business to Microsoft. Yahoo rejected Microsoft's proposal to buy its search business in July, 2008.

Microsoft officials have said repeatedly throughout the summer that they are still open to talking to Yahoo about buying its search unit (though not about buying all of Yahoo).

Do you think Yahoo is finally desperate enough to sell its search business to Microsoft?

Update: Here is more from Google as to why it backed off the Yahoo deal. From the Official Google Blog:

"We feel that the agreement would have been good for publishers, advertisers, and users -- as well, of course, for Yahoo! and Google. Why? Because it would have allowed Yahoo! (and its existing publisher partners) to show more relevant ads for queries that currently generate few or no advertisements. Better ads are more useful for users, more efficient for advertisers, and more valuable for publishers.

"However, 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. Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners. That wouldn't have been in the long-term interests of Google or our users, so we have decided to end the agreement. "

Topics: Microsoft, Banking, Google, Social Enterprise

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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4 comments
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  • Do you think Microsoft would stop at search?

    The internal factions at Yahoo which succeeded in blocking the sale to Microsoft before may still be in place, bloodied but unbowed. That group is apparently willing to relent on search, though.

    Microsoft would prefer not to be turned down again, I expect, so the company may make an offer with a reasonable chance of being accepted.

    But so long as the MSN problem continues, I think it likely Microsoft will want to purchase yahoo's expert content managers. Unless, of course, they all leave and Microsoft can hire them up piecemeal.
    Anton Philidor
  • Probably smart for Google. This was generating bad publicity. Google needs

    to protect its brand. But, not looking good for Yahoo at all.
    DonnieBoy
  • Jerry leaves CEO

    If someday you in the news: Jerry leaves CEO for Chief Yahoo, then it is done deal.
    jk_10
  • MS probably sees it as fun to watch Yahoo flounder and flail

    MS might buy something at a bankruptcy sale versus being nice enough to bid for Yahoo while it's alive. Of course, it may never die, a number of search engines are still lying around the web . . . shells of their former selves.
    Boot_Agnostic