Google / Yahoo partnership is scrapped
Citing the possibility of protracted scrutiny from government investigators, Google's senior counsel this morning stated his company has decided to back away from its AdSense sharing deal with Yahoo.
"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," reads a statement from Google SVP and Chief Legal Officer David Drummond this morning. "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 Justice Dept.'s intensified skepticism, if not outright opposition, to the deal became apparent in recent days; and comments from its Antitrust Division chief Thomas O. Barnett this morning clearly indicated his team was prepared to take a stand against it altogether.
"The companies' decision to abandon their agreement eliminates the competitive concerns identified during our investigation and eliminates the need to file an enforcement action. The arrangement likely would have denied consumers the benefits of competition: lower prices, better service, and greater innovation," stated Barnett. The team's investigation had been joined by the attorneys-general of 15 states.
After having touted the deal as a potentially company-saving source of revenue, this morning's statement from Yahoo tried downplaying the deal as not that big a loss.
"While the implementation of the services agreement with Google would have enabled Yahoo to accelerate its investments in its top business priorities through an infusion of additional operating cash flow, this deal was incremental to Yahoo's product roadmap and does not change Yahoo's commitment to innovation and growth in search," reads this morning's Yahoo statement, attributed to no one in particular. "The fundamental building blocks of a stronger Yahoo in both sponsored and algorithmic search were put in place independent of the agreement."
The idea of the partnership came about during Microsoft's overt attempt, begun last February, to acquire Yahoo. During that long ordeal, the partnership with Google was seen as an intentional source of poison that successfully soured Microsoft's interest in the company. But with Yahoo stock having plummeted to almost as low as $11 per share -- after its executives had held out for a takeover at around $30 -- that poison may have ended up souring Google's taste for the company as well. After the news broke this morning, Yahoo shares traded sharply higher on the NASDAQ exchange, gaining about 4% in active trading to nearly $14.