Google launches its 'let's annoy Microsoft' plan: Pings Yahoo and works regulators

Google has reportedly reached out to Yahoo to thwart Microsoft's unsolicited $44.6 billion bid. And in case that doesn't work Google has already started working policymakers.

Simply put, the games have begun (Techmeme). Get ready for the FUD fest folks. As noted on Friday just a few hours after Microsoft went public with its Yahoo bid Google will play a big role in this saga (see blog focus).

For starters, Google is Yahoo's best defense if it doesn't want to be acquired by Microsoft. All Yahoo has to do is outsource its search to Google--a move that would be financially beneficial to CEO Jerry Yang and Co.--and it gives Microsoft second thoughts.

According to the Wall Street Journal and Reuters, Google CEO Eric Schmidt called Yahoo's Yang to offer help to fend off Microsoft. The motives are obvious:

• Google would love to force Microsoft to pay more;
• Google wants to head Microsoft off at the pass since a combined Microsoft-Yahoo could be a search threat;
• Microsoft bitched and moaned about Google's DoubleClick acquisition.

While it's not likely that Google could get the regulators to swallow a Yahoo purchase the search giant can still raise a ruckus. Google could even bid for giggles--or help fund an effort to take Yahoo private.That latter point is important. What if Google helped fund a white-knight bidder? It would make total sense. And there would be a nice bonus--if Yahoo goes private the first thing the new owners would do is outsource search to Google.

For now it appears that Google is launching a two front war. First, Google wants to help Yahoo disrupt Microsoft. And if that effort fails Google is going to make damn sure regulators look closely at this deal.

The regulator spin has already begun as Google broke out the open Internet card. In a blog post Sunday, David Drummond, senior vice president and corporate legal offer said:

Microsoft's hostile bid for Yahoo! raises troubling questions. This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation.

Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC? While the Internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies -- and then leverage its dominance into new, adjacent markets.

Could the acquisition of Yahoo! allow Microsoft -- despite its legacy of serious legal and regulatory offenses -- to extend unfair practices from browsers and operating systems to the Internet? In addition, Microsoft plus Yahoo! equals an overwhelming share of instant messaging and web email accounts. And between them, the two companies operate the two most heavily trafficked portals on the Internet. Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors' email, IM, and web-based services? Policymakers around the world need to ask these questions -- and consumers deserve satisfying answers.

Talk about a game of Monopoly.

Brad Smith, Microsoft's general counsel, didn't mince words either.

The combination of Microsoft and Yahoo! will create a more competitive marketplace by establishing a compelling number two competitor for Internet search and online advertising. The alternative scenarios only lead to less competition on the Internet.

Today, Google is the dominant search engine and advertising company on the Web. Google has amassed about 75 percent of paid search revenues worldwide and its share continues to grow. According to published reports, Google currently has more than 65 percent search query share in the U.S. and more than 85 percent in Europe. Microsoft and Yahoo! on the other hand have roughly 30 percent combined in the U.S. and approximately 10 percent combined in Europe.

Microsoft is committed to openness, innovation, and the protection of privacy on the Internet. We believe that the combination of Microsoft and Yahoo! will advance these goals.

Add it up and you have a monopoly pissing match with Google and its search dominance in one corner and Microsoft and its Windows market share in the other. Pick your poison.