Was the Yahoo-Google Deal a Ploy To Weaken Yahoo?

JagsLive writes with a link to a BetaNews story about a US Senator who is questioning whether the deal between Yahoo and Google was brokered with less than honorable intentions on Google's part. The advertising deal came under scrutiny from the Department of Justice recently for potential antitrust violations. The deal has now been delayed in order to allow investigators more time for evaluation. Meanwhile, rumors are circulating that Yahoo will cut as much as 20% of its workforce after an internal memo from CEO Jerry Yang called for "discipline" and said the company was "getting fit" for the long term. For their part, Google has launched a site endorsing the deal and attempting to smooth the way for its approval by providing facts and positive reactions from experts.

Comments

First!

[Anonymous Coward]

Notice how the DOJ only moves on anti-trust issues when the complaint is from a big corp (Microsoft).

Re:First!

[MrNaz]

"how can a non-exclusive deal weaken yahoo"

My further entrenching a monopoly they compete with and making it far harder for new entrants of even existing market players to enter their space?

Oh, and why do you find it so hard to believe that Google would deliberately weaken its competitor? What if it was Microsoft brokering a similar deal with, say, Red Hat?

Seriously, enough with the "we love Google" rubbish. They're a profit seeking company, just like any other, and they don't play fair, they just have a better handle on how to direct your attention to the bones they throw at the FOSS community while they go about their business.

Re:First!

[shadow349]

how can a non-exclusive deal weaken yahoo, they can choose to use a different provider or thier own ads at any point?

Vlasic was in a non-exclusive deal with Wal-Mart:

Vlasic Pickles was roped into a contract with Wal-Mart, in which Wal-Mart sold a 3 gallon jar of whole pickles for $2.97. Wal-Mart sold 240,000 gallons of pickles per week. But the price of the 3 gallon jar was so low, that it vastly undercut Vlasic's sales of 8 ounce and 16 ounce jars of cut pickles; further, Vlasic only made a few pennies per 3 gallon jar. With its profits tumbling, Vlasic asked Wal-Mart for the right to raise the price per 3 gallon jar to $3.49, and according to a Vlasic executive, Wal-Mart threatened that if Vlasic tried to back out of this feature of the contract, Wal-Mart would cease carrying any Vlasic product. Eventually, a Wal-Mart executive said, "Well, we've done to pickles what we did to orange juice. We've killed it"--meaning it had wiped out competitor products. Finally, it allowed Vlasic to raise prices; but in January 2001, Vlasic filed for bankruptcy. source

Feigned buyout intentions.

[Anonymous Coward]

Feigned buyout intentions are used occasionally by unscrupulous business folks to damage competition. Here's a scenario used often (short version):

Potential buyer walk up to a company and says they would like to purchase it. The seller, who is interested says sure. After long negotiations, the buyer starts making demands for the deal to go through, such as: firing key employees because they "don't fit in the new company", canning key suppliers or not paying them on time to make the cash situation better, announcing to customers that there's a transaction going on, and other things to fuck up the company so that they will buy it - only under those conditions. Then, the buyer walks away. The seller is now pretty much fucked. It doesn't sound like anyone would fall for this, but after slow, very slow, negotiations for a while, and a strong desire by the seller to sell, it happens ever so slowly and after a while, the seller is afraid to bail because he's so far down the road, he keeps going along with the hopes of finishing.

BTW, not everyone can do this. You have to actually be someone who has the resources to do this. You or I walking up to a business, no matter how small, without any track record or business history will be ignored. It's usually done by competitors who want to knock out the competition. So, don't think you can wipe out the guy who screwed you on your WoW special edition throne.

Re:Feigned buyout intentions.

[fuzzyfuzzyfungus]

Your analysis is informative and accurate. However, it is much more a description of the Microsoft/Yahoo deal(which was a potential buyout) rather than the Google/Yahoo deal(which would involve Yahoo running some AdSense on their sites).

Re:Feigned buyout intentions.

[zbend]

Wasn't Yahoo the one who rejected the deal? Even after MS came back and sweetened it?

Re:Don't be ridiculous

[ozphx]

Shit! I dropped the keys to the Noshitmobile down the drain!

This deal is more likely to strengthen Yahoo

[Anonymous Coward]

That really doesn't make much sense. Consider this:

- Yahoo tested Google's AdSense instead of their own ad system a while ago.

- Then they switched to AdSense.

Obviously, this means that the cut they got from AdSense was higher than what they got from their own ad system, because Google's ads are better/better targeted/people pay more for AdSense/whatever other reason.

Equally obviously, the people who run Yahoo's ad system aren't needed any more. So they get laid off. New positions will open at Google though.

In other words, Yahoo is making *more* money now than before. That's not what I'd typically call 'weakening' a company.

The drawbacks for Yahoo are the following:

- Google - its main competitor - is ALSO making more money now.

- They're dependent on their main competitor; given Google's history of mostly not being assholes, that's not as bad as being dependent on other companies though. Still, I'd call this the main drawback of the deal.

- Google now knows everything about Yahoo's audience. Since they have the largest search engine and the Google toolbar though, they probably already knew this before.

To wrap it up, I do not believe that this is weakening Yahoo.

Re:This deal is more likely to strengthen Yahoo

[Firehed]

No, but it does change their place in the market. Yahoo goes from being a search, ad, and content provider to solely a content provider (one which, like the rest of the internet, uses AdSense as its primary source of income). Not only does it strengthen both companies, but it lowers the hostility between them - Google gets to focus on search and ad targeting, and Yahoo gets to focus on gaudy design to wrap around information aggregated from other sources (again, like the rest of the internet).

It just so happens that Yahoo, as the #1 site on the internet (not sure on the metric, probably time spent there per day, as I expect google would beat them on uniques), tends to do this a lot more effectively than anyone else, and as such is able to bring in a lot more money with AdSense than anyone else.

However, judging by the comments here, they seem to be losing their enthusiasm! just! a! bit!

I work at Yahoo

[CPE1704TKS]

I work at Yahoo at the Mission College campus. This article is about oh, 6 months too late? We at Yahoo already figured this out, months ago.

The day that Jerry betrayed us and announced that they were doing a "trial" test of Google ads was the nail in the coffin for most Yahoos. If you cede search and search advertising, you might as well ditch every sense of innovation and technology that the company has. And he did that. I mean, honestly, what else is there at Yahoo in terms of technology? Nothing, we become nothing more than AOL, a content provider.

In the conference call he had with search when they first announced the "experiment", he said "I want to thank you for all the hard work that you did, and it's because of all your hard work that it allows us to try this experiment." How ridiculous was this statement? It was disgusting and I guess he didn't realize how backhanded that statement was.

OF COURSE Google wants to keep Yahoo weak. I'm not a Microsoft fan, but at least a combined Yahoo-Microsoft would have had a chance to compete against Google and wrest some of that advertising space away, with Microsoft's deep pockets. Instead of fighting, which all the Yahoos wanted to do, we are just a bunch of snivelling bitches of Google now. By doing this, they prevented any decently sized competitor from being created, and they kept their two second-largest competitors separate and ununified. It was a brilliant move on Google's part.

The fact is, projects like Panama and Apex failed. But if we give up, Yahoo is basically nothing, except for a bunch of perl scripts and html pages. The only chance that Yahoo had to capture some glory was to make a compelling ad system so that we could take some market share away from Google. Now, by feeding off the teat of Google, there is NO WAY that we will ever be competitive. It was truly making a deal with the devil, to increase short term revenues, and to make their earnings numbers better to save their own asses. Next is to go completely with Google ads, and then after that next after that is to drop search altogether. Why bother? Might as well go all the way, and lay everyone in MC2 off.

Jerry Yang has completely bungled this company, and will unfortunately go down in Silicon Valley history as the worst non-fraudulent CEO ever, that ruined his own company with his own ineptitude. He should have made the deal with Microsoft. You could even tell on the devel-random list how the tone changed. Even the most die-hard Yahoos now realize what a shell of a company Yahoo has become, and are just waiting around, playing foosball and surfing the web, while we all away the great Layoff of 2008.

Re:I work at Yahoo

[DerekLyons]

If you cede search and search advertising, you might as well ditch every sense of innovation and technology that the company has. And he did that. I mean, honestly, what else is there at Yahoo in terms of technology? Nothing, we become nothing more than AOL, a content provider.

I don't know where you've been, but Yahoo! has been primarily a content provider, a portal, for years now. You sound like you are still living in 1999.

Re:I work at Yahoo

[g2devi]

Considering that the Yahoo-Google would never have happened if the Microsoft didn't try to buy up Yahoo, I don't see how Google can be blamed. Microsoft has a history of buying companies (E.g. Stak-r, Hotmail, etc) in order to rip out it's old technology, replace it with Microsoft technology, ultimately becoming Microsoft. Yahoo succeeded precisely because they were not Microsoft, so if Microsoft did absorb Yahoo, it would have destroyed it. Some speculate that it might have ultimately destroyed Microsoft too, since it would be a huge distraction away from their OS product line (which is the one that is actually making money).

Neither deal was good for Yahoo (or the general public), but the stupid "hostile takeover" rules in the US gave Yahoo no other choice than to pick the lesser of two evils.

Re:So? Is anyone really surprised?

[Anonymous Coward]

Instituting keyword filters at the request of the Chinese government. Google's do no evil policy only applies to the U.S.

This argument is, and always will be, fucking retarded.

These are your only two options when dealing with China:
1) Play by their rules, begin to do business there, then once you're entrenched there begin to try to make changes.
2) Don't play by their rules, get blocked completely. A Chinese-owned search engine takes over and is completely in the pocket of the government and always will be.

That's it. Those are your only choices. Which is the better one for the people? If you think anything but the first, you're a fucking idiot.

Yahoo more like Wal-Mart in the deal.

[pikine]

Google to Yahoo is like Vlasic to Wal-Mart in your example. Google is the supplier, and Yahoo the distributor. Establishing a distribution channel is the hard part, so Wal-Mart had an upper hand to threaten the termination of the non-exclusive deal because that would significantly affect Vlasic the supplier by undercutting its product distribution.

Yahoo in the Google ads deal already has its own distribution channel and even its own supply of ads. Yahoo is more like Wal-Mart, who carries its own Sam's Club breakfast cereal in addition to well-known brands such as Kellogg's and Quaker.