Google Walks Away From Deal: What Next For Yahoo?

Today, despite earlier eleventh-hour attempts to adjust the deal to make it work, Google walked away from its proposed search ad partnership deal with Yahoo.

Reports indicate that the California-based Internet giant balked at the prospect of a lengthy federal antitrust lawsuit that would be not only expensive, but also potentially damaging to Google’s reputation.

Attention now shifts to Yahoo and what that company can do to stay afloat. Many industry experts were convinced that Yahoo needed the deal to stay independent in the face of aggressive buy-out overtures from Microsoft — overtures that Yahoo may now be in no position to refuse.

“Yahoo had been seeking to placate shareholders dissatisfied with its performance with the promise of significant revenues from the deal,” write Chris Nuttall and Richard Waters in today’s Financial Times. Many of those shareholders were upset when Yahoo rejected a relatively generous offer from Microsoft earlier this year, and are reportedly becoming outspoken about the company’s direction.

While the short-term result was a spike in Yahoo’s Nasdaq-listed stock price because of “speculation that Microsoft would now return with a takeover offer,” the big picture is that Yahoo’s position is now worse than ever.

“The demise of this agreement will likely lead to the demise of Yahoo as an independent company,” stated Silicon Valley Congressional Representative Anna Eshoo, as quoted by an AP article (read it here).

The AP article also featured a more politically slanted take on the situation from Jeff Chester, executive director of consumer advocacy group Center for Digital Democracy: “After eight years of approving practically every merger that came before it, the Bush Justice Department finally did the right thing. It stopped Google’s plans to further consolidate its control over the online advertising business. … (But) today is a sad day for Yahoo, its founders and its employees. Yahoo is going to have to put up a for-sale sign since there is little room for No. 2 in this business.”

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