Google Pull Plug On Yahoo Ad Deal

6 11 2008

Back in June, Google and Yahoo announced a deal that would see Google’s advertising platform become integrated with Yahoo’s network. The deal was to earn Yahoo over $800 million (£494 million) a year and extend Google’s reach and advertising power.

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Yahoo was hoping that the deal with Google would appease the shareholders who were angry over the rejection of the $47.5 billion (£29.4 billion) Microsoft takeover bid. However, it was subject to objections from the US Justice Department over Anti-Trust issues. They even delayed the launch dates to give the department time to investigate.

Today it has now been revealed that Google are no-longer going to implement the deal. They mention that while they are disappointed with the deals collapse, the risks, both legally and personally, were too much.

The Official Google Blog expands on this, with :

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.

The deals collapse will hit Yahoo harder as shareholders rue the decision to reject Microsoft’s takeover bid. The software giant’s bid of $33 a share now looks like a great deal as Yahoo shares hover around the $14 mark.

The BBC believes that the collapse of this deal could be “another nail in Yahoo’s coffin”, with Tim Weber, Online Business Editor stating:

For Yahoo, the situation is getting increasingly dire.

Yes, its websites are still the most popular Internet destinations in the United States (more popular than Google), but this huge presence on the web is simply not generating enough revenue.

The company is lacking the buzz that it needs to grow, is short of a business model and is wearing thin the patience of its shareholders.

It is true that Yahoo, despite being a huge company and brand, are going to struggle to get past these two massive failures in terms of the Microsoft takeover and Google advertising deal. They are a very distance second place to Google in terms of search and needed this deal to boost their image and income. However, Google will come out of this smelling of roses. The only downside is that the audience their ads reach will not increase as much. Yet, as reported on Just Google It in the past, Google are spreading their ads about on their own turf. We at Just Google It speculated that placing Ads on Google Maps is worth $600 million a year, much more than they’d receive from appearing on the Yahoo network.

Weber goes on to announce that Google’s actions have also helped weaken Microsoft, as well as Yahoo, leaving Google as the one-winner from the whole saga:

[Google’s] brief collaboration with Yahoo scuppered that company’s merger with Microsoft. The protracted and ultimately failed takeover bid itself, meanwhile, consumed a huge amount of Microsoft’s corporate energy.Yahoo, meanwhile, may find it difficult to find the cash for the investments needed to compete with its web rivals.

At the end of it, Google stands unscathed, with two important competitors weakened.

Of course this was not Google’s aim of the whole deal, but it certainly takes the sting out of its collapse.

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