Microsoft Corp. has withdrawn its $43-billion bid for Yahoo, at least for now, in the face of the Yahoo board's demand for billions of dollars more. The withdrawal cheered Yahoo executives and opponents of the takeover, most notably Google, whose dominance over some kinds of online advertising was threatened by the pairing. But if Yahoo responds by joining forces with Google, consumers and advertisers might end up worse off than had the Microsoft deal gone through.
Don't get us wrong, we're not in the Google Is Evil camp. We'd just like to have lively competition in online advertising. Sometimes choice and innovation are promoted when weaker competitors join forces to battle stronger ones. But when a dominant competitor co-opts the runner-up, that's troubling.
Such would be the case if Yahoo took its search advertising business, which now ranks a distant second behind Google in market share, and handed it over to Google. Search advertising is a powerful way to sell goods and services, promote a brand and compete with better-known rivals. For example, if Brand X wants to sell more detergent, it might pay a search engine such as Google or Yahoo to show ads for that product whenever someone searches for "best detergent" or "Tide." The effectiveness of such ads, though, depends in part on how many people see them. Google's system already delivers ads to more searchers than any of its competitors; adding Yahoo's giant audience to its own would make Google's service more compelling to advertisers -- and more difficult for anyone else to compete with.
