Yahoo Ends Microsoft Talks, Inks Google Deal

• Posted: Sunday, June 15, 2008
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• Author: pradhana
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• Filed under: Google, Yahoo

By Jason Ankeny

Yahoo said Thursday that its merger discussions with Microsoft have officially concluded, hours later announcing a non-exclusive digital advertising agreement with rival web services giant Google.

According to Yahoo, months of negotiations with Microsoft culminated in a June 8 meeting where the software Goliath stated unequivocally it is not interested in acquiring all of Yahoo, even at the $47.5 million price it had proposed last month, and instead wished only to purchase its search division. The Yahoo board balked at the deal, determining it would strip the company of a critical component of its strategic future.

Yahoo will now pin its hopes on Google, its biggest rival. The deal, which Yahoo promises will enhance its position in the converging search and display marketplace, enables Yahoo to run ads supplied by Google alongside its own search results and on some of its web properties in the U.S. and Canada. The non-exclusive agreement allows Yahoo the latitude to display paid search results from Google, other third parties and its own Panama marketplace.

Many onlookers suggest the Yahoo/Google deal is little more than a band-aid solution, however--it does little to address challenges like market share erosion and diminishing web traffic growth. Moreover, the Yahoo executive exodus continues: On Thursday, The New York Times reported the resignations of Jeff Weiner, executive vice president of Yahoo's network division, and Usama Fayyad, chief data officer and executive vice president of research and strategic data solutions.

Nor is it clear how the Yahoo/Google partnership will impact activist investor Carl Icahn's continuing crusade to oust Yahoo's board as part of his effort to sell the company to Microsoft. Shareholders will vote on Icahn's slate of board nominees during the firm's annual meeting on August 1. And of course, a deal between the two largest search engines promises to generate antitrust concerns--the smart money suggests the Department of Justice will give the deal a thorough regulatory review. [FierceMobileContent]

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