Justice Department May Have Just Killed Yahoo; Google Drops Partnership

from the you-wanted-less-competition,-you-got-it dept

Well, apparently even the greatly scaled back version of their ad partnership wasn't enough to appease a Justice Department intent on suing Google for antitrust no matter what the real issues are. Google had previously threatened to kill the deal if the Justice Department didn't ease up on its position, so it really shouldn't come as a surprise to anyone that Google has now dropped out of the deal entirely.

The government is still insisting that it would have represented a monopoly, as around 90% of the "relevant market" would have been managed by one company. First of all, they were only looking at the search ad market, which is hardly the relevant market. Advertising budgets pay for much more than search ads, and if search ads really became more expensive, it would only open up opportunities for alternative means of advertising. Besides, there was still little to no indication that any such deal would increase advertising fees. Given Google's auction based system, and the fact that this would increase inventory, there's plenty of reason to believe it would actually decrease advertising costs.

In the end, killing off this deal may represent a pretty big blow to Yahoo's chances of moving forward as an independent concern. The company was very much relying on the Google deal to stabilize its financial condition. Without that, Yahoo is in trouble -- meaning there's probably a good chance that Microsoft takes another look at acquiring the company for much, much less than before. That means, Yahoo as we know it, disappears. Considering the Justice Department wanted more competition rather than less, it's unfortunate that it's misguided decision is effectively killing off one of the competitors.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Reed, Nov 5th, 2008 @ 11:28am

    This Stinks

    I hate to even bring up Microsoft, but they are a great example of a 90%+ monopoly that still exists without any real competition. The justice department couldn't break them up, but they prevent their competition from getting the same type of stranglehold they have.

    This stinks of corruption and back door deals. What if Google had partnered with Yahoo, would they suddenly force people to sign contracts to exclusively search with them?

    Or maybe they would start paying people to use their search engine like Microsoft did with Live search?

    It is hard to not be bitter about the justice department when you see how they pussyfooted around Microsoft and then bring out the big stick for Google.

     

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  2.  
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    Anonymous Coward, Nov 5th, 2008 @ 12:18pm

    Re: This Stinks

    2 wrongs don't make a right.

    The way I take this, the DOJ is afraid of allowing another "Microsoft" type monopoly situation so they're overreacting. I mean face it, at a quick glance the Google-Yahoo deal SOUNDS like it would be a monopoly type situation. It is only after really thinking it over one realizes that is not the case at all and that Yahoo should be able to be a customer of Google's if they so choose.

    Essentially what this means is the DOJ is forcing Yahoo to keep a failing business model they don't even WANT to have.

    But Yahoo would be the only ones that could fight back on it. Google would love to have Yahoo has a customer, but it isn't a requirement for them. Yahoo needs to ditch a failing part of their business and this is going to hurt an already reeling company.

     

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  3.  
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    Mike, Nov 5th, 2008 @ 12:29pm

    and?

    Remind me again what Yahoo does that anyone will miss? I used to have to "deal" with them through a Verizon contract, and they were the WORST people to have to deal with, if they dissapear I can't say it would hurt anyone.

     

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  4.  
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    Kinetic, Nov 5th, 2008 @ 12:37pm

    not justice department's fault

    Jerry Yang is guilty of disservice to Yahoo shareholders. It is because of his arrogance that Yahoo is in it's present condition.

    The justice department isn't responsible for poor business decisions by Yahoo's board/CEO. Yahoo is.

    They may have killed the deal, but Yahoo should have taken the offer from M$ if they were so concerned about their financial position.

     

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  5.  
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    dave, Nov 5th, 2008 @ 1:08pm

    The real question is will the DOJ let MS buy Yahoo. If yahoo search can't do a deal with Google because it would be a monopoly. Why would MS search be allowed to purchase it. It's the same thing but worse actually...

     

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  6.  
    identicon
    Hulser, Nov 5th, 2008 @ 1:17pm

    Re: This Stinks

    I hate to even bring up Microsoft, but they are a great example of a 90%+ monopoly that still exists without any real competition.

    In what market do you believe Microsoft to be a monopoly? No one can legitimatly say that Microsoft has a clean record when it comes to shady business practices, but as it stands now, every market that Microsoft is in there are more than just token alternatives and options. Sure, Microsoft has the momentum of being the default option for OSs, office suite apps, browsers, etc. But it takes more than this to be a monopoly in my mind. Personally, I think the companies that are the sole source of high-speed Internet in specific areas are far closer to being a monopoly than MS.

     

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  7.  
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    Darren Tomlyn (profile), Nov 5th, 2008 @ 1:31pm

    Short-term thinking...

    And here we have yet another case of short-term thinking (on both sides) making things far worse than they needed to be...

    I don't know why, but it seems like a lot of companies and organizations on both sides of the Atlantic atm seem to be suffering from short-sightedness, and it's a bit frustrating. Especially when you yourself suffer for it.

    I'd ask if there's anyone out there these days that does actually think in the long-term, but we've just had the best example of it in the U.S. Presidential Election from Barack Obama. If anyone out there can learn anything from this Election, then please learn that...

    (Bit of an OT rant, but I really feel a need to post this somewhere, sorry):

    (Unfortunately I've been hit by a case of short-term thinking aswell, by the people at hexus.net.

    I'm a potential customer - (am looking for a PC PSU and SATA DVDR - (my current PSU is too old for SATA, and is not powerful enough to run the new computer (M-B/CPU/Memory) I'm looking to buy early in the new year), right NOW - (TODAY!), with an eye on further purchases in the new year - (need to replace my DAW, which died)).

    I was originally planning to buy from cconline.com but thought I'd ask some more about which PSU to buy, so I visited hexus to ask - (since they, like me, are UK based), and found that they are affiliated with scan.co.uk and have a deal that if you make 20 posts on their forums, you get free P&P.

    So, you'd think that, since I was looking to buy the next day, (which I was very open about), it would be in THEIR interests to have me be able to make those 20 posts - (so long as they're not out-and-out spam!) - in order to buy through them, from scan, and not cconline, right?

    So when I created a thread in their general discussion area - (so it's out of the way, and not Off Topic) - (I created a thread for something I'd been hammering away at all yesterday morning (I had 51 of them at the time - have written more last night) - U.S. Election haiku - (it started on the TIME magazine Swampland blogs)) - I was open about the fact that I was going to make 10 quick posts containing my poetry - (it was all I needed to make to get the free P&P), and I thought they'd understand...

    How wrong can someone be? You'd have thought that getting 20 posts in their forums for free P&P would cause the world to end, based on their replies! Now, I'm a creative person - (I normally write music, not poetry) - and I don't like it when people tell me when I how I must do so.

    Needless to say, as far as I'm concerned, hexus.net no longer exists, and scan.co.uk has lost a customer. I even emailed them to let them know, since it's not their fault, though it is, unfortunately for them, their problem.

    Just another example of why being petty towards potential customers is not a good idea if you wish for them to become ACTUAL customers. Although the media companies like to do the same thing, they at least have a monopoly over certain products that almost allows them to get away with it. Consumer online computer hardware companies, however, most certainly DON'T.

    /rant.

    I'll leave you with an example of the poetry I was posting for my discount:

    Palin and McCain
    Blizzard snow and desert rain
    Failed in (Failing) their campaign

    End.)

     

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  8.  
    identicon
    dirk, Nov 5th, 2008 @ 2:06pm

    I smell another bail out!

     

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  9.  
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    mike42 (profile), Nov 5th, 2008 @ 4:07pm

    Re: Re: This Stinks

    Microsoft owns 90% of the desktops in use today. That sounds pretty monopolistic to most people, regardless of how they got there.

    I personally agree with you, it's really just less suck than the other OS's.

     

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  10.  
    identicon
    reed, Nov 5th, 2008 @ 4:16pm

    Re: Re: This Stinks

    Microsoft has a monopoly on the desktop market.

    How important do you think desktop computers are nowadays?

    Our society is so dependent on Microsoft it isn't funny, it is sad.

    Don't even mention Mac as a competitor because they are even more proprietary and monopolistic than Microsoft in their practices. The only thing they are missing is the market share.

    So what are these alternative desktops you are talking about? I am a big fan a Linux myself, but as long as Microsoft refuses to document how their operating system works we will never break completely free from their legacy.

    A solution like Wine could turn things around and allow Windows programs to run under any operating system, but they are still not quite there yet.

    Diversity is a sign of strength and we are extremely weak in this area. No wonder why we have to fight $18 billion dollars in spam a year. This is what happens when you rely on one operating system to heavily.

    If Microsoft had to pay for their poor programming and the results they wouldn't be making half the profit they are.

     

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  11.  
    identicon
    Willton, Nov 5th, 2008 @ 8:39pm

    Killing off competitors

    The welfare of competitors is of no moment to antitrust law; antitrust law's concern is with the welfare of competition itself. Robust competition can exist with few players in a field just as it can with many players in a field. The elimination of a competitor due to competitive conduct does not lessen competition; if anything, it maintains it. If Yahoo can't hack it as a going concern without this deal, that's Yahoo's problem, not the DOJ's.

    If Google is backing out because of antitrust scrutiny, it's likely because Google thinks it will lose such a case. Given that a majority of the judges in the federal judiciary are antitrust minimalists, especially in the Supreme Court, I find that fact to be significant. Google likely has good antitrust counsel available to them, and if they agree with you that the DOJ has no case, then I'm sure that Google would not be bowing out of this deal. Obviously, Google does not appear to share your view.

     

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  12.  
    identicon
    Paul, Nov 5th, 2008 @ 10:10pm

    Do you actually believe everything that you type, Mike? Or do you just enjoy spewing garbage as the role of devil's advocate?

    Take a step back and really consider where you are placing yourself on many of your favored topics.

     

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  13.  
    icon
    Mike (profile), Nov 6th, 2008 @ 1:03am

    Re:

    Do you actually believe everything that you type, Mike? Or do you just enjoy spewing garbage as the role of devil's advocate?

    I believe everything I write. Why would I write it otherwise?

    I am, however, open to changing my opinion if someone presents evidence.

    Yet, when you come here and insult me personally, as you do quite frequently, you never seem to present any evidence. Only insults.

    I wonder why that is?

     

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  14.  
    identicon
    Estigy, Nov 6th, 2008 @ 3:15am

    Who sais that Google will keep his system?

    I agree with you in general, but one sentence made me think:

    Given Google's auction based system,

    Who sais that this will be the same system for ever?

    They could change their system immediately after the deal.

     

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  15.  
    identicon
    Hulser, Nov 6th, 2008 @ 10:33am

    Re: Re: Re: This Stinks

    I know I'm late in repling, but here it goes...

    Microsoft has a monopoly on the desktop market.

    I disagree.


    How important do you think desktop computers are nowadays?

    Very. Your point?


    Our society is so dependent on Microsoft it isn't funny, it is sad.

    Sad != monopoly


    Don't even mention Mac as a competitor because they are even more proprietary and monopolistic than Microsoft in their practices. The only thing they are missing is the market share.

    So, Apple is a monopoly too in the desktop market? You may want to look up what monopoly means.


    So what are these alternative desktops you are talking about?

    Where did I talk about "alternative desktops"?


    I am a big fan a Linux myself, but as long as Microsoft refuses to document how their operating system works we will never break completely free from their legacy.

    And this proves Microsoft is a monopoly how? You may not like that most people choose to use Microsoft products (or, more appropriately, don't choose to use other products), but that doesn't mean that there aren't choices out there.


    Diversity is a sign of strength and we are extremely weak in this area.

    In certain contexts, such as Operating Systems, there is strength in uniformity.

    No wonder why we have to fight $18 billion dollars in spam a year. This is what happens when you rely on one operating system to heavily.

    So, you're suggesting that we should artificialy fragment the OS market as a means to fight spam? This is laughable.

    If Microsoft had to pay for their poor programming and the results they wouldn't be making half the profit they are.

    They do pay. But fortunately for them, the benefits of a de facto standard OS/Office app/etc so far outweighs the drawbacks that they're still one of the richest companies in the world.

     

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