Google’s Schmidt: Independent Yahoo Still Important To Competition

Last year, Google and Yahoo were denied a deal that would have left Yahoo with its own search technology, after the US Department Of Justice rattled its anti-trust saber. This year, Yahoo’s pursuing a deal to sell off its tech to Microsoft. While Google CEO Eric Schmidt sees his company’s former deal as “part of history,” he said Google still feels an “independent” Yahoo is important.

Yahoo CEO Carol Bartz is banking heavily on the idea that Yahoo can stay competitive in search even without its own search technology. I wondered if Schmidt agreed, given how much he knows Google spends on its own technology. Last week during an interview, I asked if he felt Yahoo could stay a competitive player, if it gave up its search tech.

Schmidt dodged answering that one, saying he wanted to avoid specifics, as Google hasn’t taken an stance on the deal:

We have not taken a position on the deal. First place, as you know we proposed a deal which we came within an hour of being sued by the U.S. government over. So, in the annals of Google and Yahoo, that’s the deal we would like. And obviously that can’t happen right now. So I think it probably would sound like spoiled, whatever the term is, complaining to talk a lot about the Yahoo-Microsoft stuff. Historically Microsoft has not been a very good partner in these things. And so we’ve decided to take the perspective of just waiting. Let’s see more. I’m trying to avoid answering a specific question about Yahoo. Because one, I think it’s a little unfair for me, and second is that we truly don’t know.

But Google has taken a position to some degree, putting out this statement after the deal was initially announced:

There has traditionally been a lot of competition online, and our experience is that competition brings about great things for users. We’re interested to learn more about the deal.

In other words, the search space currently has Google, Yahoo and Microsoft currently as major competitors. The worry in that statement is that the Microsoft won’t leave Yahoo as competing. In contrast, when Google announced its proposed deal with Yahoo, the fact that Yahoo would keep its technology was positioned as important for Yahoo to stay strong. When I raised this issue, Schmidt reflected lightly on the differences between the two deals and how ultimately, he thinks an independent Yahoo helps search competition:

There are some significant differences. As we understand it there are some significant differences in the deal. In our deal it was non-exclusive. In our deal they would remain in the search space. In our deal they would maintain a direct advertising sales force. There are quite a few differences. But as I said, that’s not a deal that we could get through today, and we didn’t get it through in November. So it’s sort of like, what’s to say about it? It’s part of history. We took a very strong position that an independent Yahoo was important. And I think that remains our view. Because an independent Yahoo means more competition in the space in general. It’s better for advertisers, it’s better for content. You know, Yahoo has basically become a good company.