Yahoo still playing hard to get

Just days after rebuffing Microsoft, Yahoo now has to fend off the amorous advances of Google...

Last Updated: 31 Aug 2010

Not content with doing its level best to scupper the Microsoft and Yahoo deal (which finally collapsed last weekend), search giant Google is now fluttering its eyelashes and making come-hither gestures at Yahoo now it’s back on the market. Yahoo agreed to outsource a small proportion of its online advertising to Google for two weeks last month in a move widely seen as a ‘poison pill’ defence against Microsoft’s takeover – and now Google wants more.

‘We have been talking to Yahoo and we are very excited to be working with them,’ Google co-boss Sergey Brin apparently told reporters before the AGM. ‘We share a lot of values with them.’ By which he presumably means: they both like search and they both hate Microsoft…

The temporary tie-up certainly seems to have had the desired effect – Microsoft boss Steve Bullmer cited it as the major reason why he chose not to take his bid directly to shareholders. But Brin’s trouble is that now Microsoft is out of the picture (at least for the time being) Yahoo might be a little more reluctant to team up with its biggest rival. Admittedly it makes more money from these search terms by outsourcing them to Google (because Google’s searches are much more profitable than any of its competitors) but it still seems a bit bizarre to outsource the most successful bit of your business to the market leader. It’s a bit like Arsenal or Liverpool letting their best players turn out for Man United – hardly likely to help the wannabe catch up in the long run….

On the face of it, it also seems slightly odd that Google should want to support its nearest rival – but actually it’s got a lot to gain. First and foremost it keeps one foot pressed firmly against the throat of Microsoft (since it’s left without any kind of foothold in online advertising). But it’s also a way to keep Yahoo and co in check: as long as Google’s running the most popular ads of its nearest rival, it’s going to be tough for anyone to build up the necessary scale to compete. And as an added bonus, it gets to look benevolent at the same time. Ideal.

Of course there is a more generous interpretation: that as fellow Stanford alumni, Brin and Larry Page are just doing their old chum Jerry Yang a favour. And it’s true that Yahoo did much to promote Google in its early days, so they probably owe him one. But we reckon that keeping Microsoft at arm’s length is probably higher up the priority list...

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