Business

Google Isn't Going to Wait Forever For Yahoo

Google reversed course late Friday afternoon when it agreed to "briefly" delay consummation of a search advertising deal with Yahoo to give regulators more time to investigate after putting it off voluntarily for four months. But if the Justice Department decides to carry out a full investigation it could be a year or more before […]

Googleyahoologos Google reversed course late Friday afternoon when it agreed to "briefly" delay consummation of a search advertising deal with Yahoo to give regulators more time to investigate after putting it off voluntarily for four months.

But if the Justice Department decides to carry out a full investigation it could be a year or more before a decision is made.
Google has the resources to wait it out. But does Yahoo? And will Google be willing to wait around that long?

Google's "assumption that regulators would just agree to approve the deal was a bit naïve — especially given the level of lobbying that
Microsoft has been doing," says Jeffrey Lindsay, Senior Analyst at
Bernstein Research.

Increased opposition to the deal in the last month and the appointment of top litigator Sanford Litvak as special counsel on the case is further evidence that Justice is looking for a full-fledged investigation, according to Lindsay:

"Google may have invited a lot of regulatory scrutiny that it will regret... It is unlikely that a review starting now would be finished before the change of administration. It's likely that it would start up all over next year. We're looking at at least nine months to a year."

Asked about the delay, a Google spokesperson told Wired.com: “As we are still in conversation with the Department of Justice we have agreed to a brief delay in implementing the agreement while those discussions continue."

Just last month, Google's CEO Eric Schmidt said that the company would move forward this month regardless of the Justice Department's investigation. ''To delay any longer would be to lose money, time is money in our business," he said.

With an almost 70 percent share of the search market, Google agreed to voluntarily delay its non-exclusive partnership with Yahoo for four months while the DoJ investigated its anti-trust threats. The June deal, which would allow Yahoo to serve Google adds to some of Yahoo's underperforming search terms, has led to concerns that Yahoo will become dependent on Google's advertising and shrink its share of the search market even further (it currently has less about 20 percent market share).

In response, advertising associations and international regulatory bodies led by Microsoft (who made a failed offer to buy Yahoo earlier this year), have spoken out against the deal.

If the deal is delayed for any serious length of time, Google may get cold feet. "That would force Yahoo down a different path," says Lindsay. "Making it more likely that Yahoo gets acquired by Microsoft." Which is a big reason, of course, why
Microsoft has taken such a strong stance against the Google partnership; the spoils would no doubt be worth considerably less than the $33 a share that Yahoo rejected a few short months ago.

Yahoo is not competitive with Google in search, but it is competitive in mobile search and is currently the top display advertiser online. According to Lindsay, the Google pact could supply Yahoo with much needed cash to fund its other — successful — businesses.

But if the deal does not go through, for whatever reason, it could only spell trouble for Yahoo. Says Lindsay:

“It’s rather like watching a chess game when one of the players makes a terrible mistake and no matter what he does in the next 20 moves, he loses. Right now we’re just watching those 20 moves.”

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