Google and Yahoo has abandoned their efforts to overcome the objections of the antitrust regulators who have hindered it’s progress because they believe it would give Google too much power over online advertising.

This was announced today [Wed Nov 5]. This could be seen as another hit for Yahoo is currently at $14.02 a share. Yahoo had previously hoped that this deal would give a $800 million boost to it’s revenue line. It was a reaction deal to the shareholders anger over management’s decision to forego the $47.5 billion takeover deal by Microsoft.

Google had previously announced that this deal would have been great for the online world. However Google is not expected to take much of a hit because of it’s dominant hold on search marketing.

“We’re of course disappointed that this deal won’t be moving ahead,” David Drummond, Google’s chief legal officer, wrote on a company blog. “But we’re not going to let the prospect of a lengthy legal battle distract us from our core mission. That would be like trying to drive down the road of innovation with the parking brake on.”

This is a big win for Microsoft as they had spent a lot of money and effort to keep this partnership from happening. They had given evidence to regulators showing that this partnership would hurt competition. They also led a campaign that led to advertisers sending in a formal complaint against the partnership.

Google had tried to propose limitations on the partnership in efforts to appease the regulators without success. However considering Google and Yahoo would together control 80 percent of the US search advertising market, the concerns over market prices and control was too much to overcome. “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,” Drummond wrote. “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.”

Yahoo is still struggling to figure out it’s direction. They’ve had discussions with AOL about working together. They still have shareholders clamoring to sell to Microsoft even if it means at a much lower price.

Paul Lee
Director of Online Marketing
LeadQual - SEM

Tags: Advertising, google, Microsoft, MSN, Online Advertising, Search Engine, Search Engine Marketing, yahoo

This entry was posted on Wednesday, November 5th, 2008 at 5:31 pm and is filed under Search Engine Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.