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Info Yahoo's Head in the Sand - 19-July-2008, 16:10

Yahoo's Head in the Sand

The executives who run Yahoo must be kidding themselves.

In an effort to avoid a takeover by the software monster known as Microsoft, the No. 2 internet search engine has sold part of its soul to the No. 1 competitor in the space, a company known for its "do no evil" mantra.

This week, Yahoo and Google defended their pending collaboration, in which Google will provide Yahoo access to its search and contextual advertising technology, before lawmakers on Capitol Hill. The move came after weeks of Microsoft pursuing an acquisition of Yahoo, a story that has its own twists and turns.

Google and Yahoo have portrayed the deal as a straightforward supplier arrangement that will benefit advertisers and ensure the survival of Yahoo.

And the companies have promised to keep up the competition. Yahoo General Counsel Michael Callahan insisted that the company is not ceding any portion of the search business to Google. "With all due respect to Google, we have every intention of fighting them and winning in this and in other areas for years to come," he said during testimony on Capitol Hill.

Others don't see the Yahoo/Google relationship in those terms.

Competition from an independent Yahoo "is the only thing that keeps Google from achieving complete control over the online search advertising business," Matthew Crowley, chief marketing officer for, told lawmakers this week.

A Google/Yahoo collaboration would not ensure a competitive check on Google's dominance. Worse yet, "It would merely create a dependent and atrophying Yahoo," Crowley said.

The Google agreement with Yahoo may relate only to text advertisements. However, "if it stifles competition in this market, that will quickly spill into emerging online ad markets such as delivery to mobile devices," said Sen. Patrick Leahy, the Vermont Democrat and chair of the Senate Judiciary Committee.

In terms of the Google relationship, there may be better avenues that Yahoo could've traveled in an effort to resurrect its troubled search business. And, to be honest, Microsoft may not be the perfect fit for the No. 2 internet search company.

Nonetheless, this week's events surrounding Jerry Yang and Co. raises more questions than answers about the challenged internet giant's prospects.
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