Can Google Save Yahoo By Taking Over Search?

Microsoft Yahoo

Does Yahoo have any choice but to get purchased by Microsoft? Over the weekend, there’s been much analysis and discussion of other suitors. While Google isn’t seen as an outright buyer, there’s more talk that it could help Yahoo by taking over search ads in various counties, with reports on this out from the Wall Street Journal and Reuters.

It has seemed unlikely to many that Google could buy Yahoo, since it had trouble enough getting regulatory approval (from the US so far) to buy DoubleClick, which barely competes with Google. Yahoo is a direct competitor in search and ads, and a purchase by Google would only strengthen that company’s dominance.

The Wall Street Journal reports today that Google CEO Eric Schmidt called Yahoo CEO Jerry Yang to offer Yahoo help, though what that was isn’t said. Speculation is that Google might offer money or revenue guarantees for an ad pact with Yahoo.

I’ve commented before (most recently in Ad Age) that I think it would be silly for Yahoo to get out of serving ads on its own. But if Yahoo’s looking at a choice of being absorbed by Microsoft, it’s effectively getting out of the game anyway. If it wants to stay independent, an ad pact might make sense. That’s even more so if it gives Yahoo guaranteed revenues and can play out in countries where Yahoo isn’t strong. From the Journal:

Yahoo already had been in negotiations in recent weeks to outsource its Web-search advertising in Europe to Google, say people familiar with the matter. Since last year, investors have called for Yahoo to abandon its own search advertising system, which generates significantly less ad revenue for each consumer search, and use ads from Google in return for a majority share of the revenue.

I still think it would be a bad long-term move to make, for Yahoo to dump its own ad and search technologies. But getting out of ads in Europe makes more sense because Yahoo has been weaker there, plus it has a terrible system that requires advertisers who wish to target a particular country to open different accounts.

Jumping away from European countries where it is already considering a shutdown of staff could indeed be a good move. That shutdown means Yahoo portals would eventually disappear in terms of traffic, similar to how Excite has suffered over the years. But a Google pact could bring Yahoo plenty of short-term money and allow it to stay focused on regions where it is strong.

Reuters reports similar news about a Google-Yahoo ad pact in general:

Yahoo Inc would consider a business alliance with Google Inc as one way to rebuff a $44.6 billion takeover proposal by Microsoft, a source familiar with Yahoo’s strategy said on Sunday.

Yahoo management is considering revisiting talks it held with Google several months ago on an alliance as an alternative to Microsoft’s bid, which, at $31 a share, Yahoo management believes undervalues the company, the source said.

How about other companies? Don’t look at News Corp or other players like AOL, reports the New York Times:

In addition, several Google executives made “back-channel” calls over the weekend to allies at companies like Time Warner, which owns AOL, to inquire whether they planned to pursue a rival offer and how they could assist, these people said. Google owns 5 percent of AOL.

Despite Google’s efforts and the work of Yahoo’s own bankers over the weekend to garner interest in a bid to rival Microsoft’s, one did not seem likely, at least at this early stage.

For example, a spokesman for the News Corporation said Sunday night that it was not preparing a bid, and other frequently named prospective suitors like Time Warner, AT&T and Comcast have not begun work on offers, people close to them said. They suggested that they did not want to enter a bidding war with Microsoft, which could easily top their offers.

TechCrunch has a rundown on players that might help Yahoo as well, with the most interesting but perhaps unlikely being a rumored plan by Yahoo’s former COO Dan Rosensweig to sell off most of Yahoo and give Facebook its search and ad assets.

Now that would be interesting. Facebook continues to be a company with lots of potential but no real core search capability, plus its current ads system is so basic to be laughable when compared to the mature ad systems at Google and Yahoo (see My Love/Hate Relationship With Facebook Ads: 10 Ways They Could Improve).

For past coverage on the Microsoft proposal from Search Engine Land, see our Microsoft & Yahoo Merger category. For discussion across the web on the Google move, see here on Blogrunner and see here and here on Techmeme.

Related Topics: Channel: Industry | Google: Business Issues | Microsoft & Yahoo Search Deal | Microsoft: Business Issues | Yahoo: Business Issues


About The Author: is a Founding Editor of Search Engine Land. He’s a widely cited authority on search engines and search marketing issues who has covered the space since 1996. Danny also serves as Chief Content Officer for Third Door Media, which publishes Search Engine Land and produces the SMX: Search Marketing Expo conference series. He has a personal blog called Daggle (and keeps his disclosures page there). He can be found on Facebook, Google + and microblogs on Twitter as @dannysullivan.

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