Google pulls out of Yahoo advertising partnership
WASHINGTON -- Google Inc. and Yahoo Inc. have scrapped their Internet advertising partnership, abandoning attempts to overcome the objections of antitrust regulators and customers who believed the alliance would give Google too much power over online commerce.
The retreat announced Wednesday represented another setback for Yahoo, which 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. nearly six months ago.
Without Google's help, Yahoo now may feel more pressure to renew talks with Microsoft and ultimately sell for a price well below the $33 per share that Microsoft offered in May. Yahoo shares traded Wednesday morning at just $13.67, up 2.4 percent on the day.
Surrendering the chance to sell ads on Yahoo's popular Web site won't be a significant financial blow for Google, which already runs the Internet's largest and most prosperous advertising network.
But the capitulation marks a rare comedown for Google, which had been insisting for more than four months that the Internet would be a better place to do business if it were allowed to work with Yahoo.
"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."
Google's management took a strategic risk by agreeing to the Yahoo partnership in June, knowing the move would increase the government's scrutiny of Google's market power. Even though it is now walking away empty-handed, Google figures to remain in regulators' sights as it tries to expand.
"For the first time, Google has run into real opposition to its marketplace goals," said Jeff Chester, executive director of the Center for Digital Democracy, a consumer advocacy group. "Google is aware that its aggressive moves in the online advertising business are potentially contributing to damaging its brand. The perception of Google has changed."
The collapse of the Google-Yahoo alliance shapes up as a potential coup for Microsoft.
Although it has publicly said it's no longer interested in buying Yahoo, Microsoft spent a lot of time and money trying to keep Google and Yahoo from coming together.
