Google Withdraws From Yahoo Search Engine Deal
Google announced Wednesday it has abandoned plans for a future search advertising partnership with Yahoo over objections from antitrust regulators and advertisers.
Google’s decision comes as another challenging setback for the struggling Yahoo.
Yahoo had been counting on the Google deal to boost its annual revenue by $800 million and placate shareholders still incensed by management’s decision to reject a $47.5 billion takeover bid from Microsoft Corp. six months ago.
Google withdrew from the deal after the U.S. Justice Department announced it would sue to block the Yahoo deal to preserve competition in the Internet’s rapidly growing advertising market.
"Had the companies implemented their arrangement, Yahoo’s competition likely would have been blunted immediately with respect to the search pages that Yahoo chose to fill with ads sold by Google rather than its own ads," the Justice Department said.
Yahoo said it was “disappointed that Google had elected to withdraw from the agreement rather than defend it in court.”
Likewise, Google legal officer, David Drummond, said the company was of course disappointed that the deal won’t be moving ahead.
"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," he said in an internet posting.
Thomas Barnett, an assistant attorney general who oversees the Justice Department’s antitrust division, said the arrangement likely would have denied consumers the benefits of competition such as lower prices, better service and greater innovation.
Google and Yahoo had more than 80 percent of the web search market between them.
For many, Google’s withdrawal from the Yahoo deal comes as a shock.
Google Chief Executive Eric Schmidt said in August the company would move forward with the partnership in October, with or without approval from the Justice Department.
But apparently, advertisers strongly opposed the deal, arguing that Google and Yahoo’s dominance of the market could mean they would raise prices.
Part of Google’s decision might concern Yahoo’s talks on buying the content and advertising operations of Time Warner Inc’s AOL unit. Yahoo initially struck a deal with Google as a way to fend off an unsolicited takeover bid from Microsoft Corp.
The end of the Google-Yahoo partnership comes as a victory for Microsoft.
The world’s largest software maker spent a lot of time and money to persuade regulators the partnership would diminish competition. Microsoft also helped orchestrate the campaign that prompted major advertisers to lodge formal complaints against the proposed partnership.
However, may analysts still believe Microsoft will make another run at Yahoo, particularly now that the company can be bought at a fraction of the May offer.
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