Selling the suckers on Google-Yahoo

While the food fight between Yahoo and Carl Icahn escalates--and while I'm at it, don't forget Microsoft--both the House and Senate Judiciary committees are getting ready to hold hearings on the proposed Yahoo-Google tie-up. In advance of this primo photo op for the hired help, I had a chance to review the prepared testimony of David Drummond, Google's chief legal officer. Give the guy credit for putting together a crisp presentation. Among the highlights:

• If Uncle Sam green-lights this deal, Google won't wind up taking nearly total control of the search market.

• The deal is good for users and advertisers.

• Google is not going to wind up with more search traffic.

It's hard to say all that and keep a straight face, but Drummond's a good lawyer and I'm sure he'll give a convincing presentation. Drummond knows he better bring his A game because he's going up against far sharper minds than the grandstanders who turned the 2006 China-Internet hearings into a veritable circus.

Drummond's central argument will be that Yahoo remains a viable rival. That's where the debate will ensue. How is more concentration of power--i.e. even greater dependence on a single company--supposed to benefit online advertisers? Just to show humor is in no short supply, Microsoft will play that card for all its worth. The biggest software monopoly in history can rightly argue that Google accounts for about three-fourths of search advertising revenue (and roughly the same number of search queries) in the world. Add Yahoo's roughly 20 percent and that translates into POWER. Microsoft knows something about that. But I digress.

Microsoft should also hammer hard on another point: the Yahoo-Google arrangement is structured so that Yahoo earns more money when Google earns more money. Because it will share in Google's revenue, what's Yahoo's incentive for competing against its partner? Google has a briefcase full of counterarguments to offer, but it's going to be a tough sell. Especially considering the change in the political constellation of forces. After nearly eight years letting corporate America have its way, Uncle Sam has piled up a fairly lousy economic track record. And now Congress is being asked to remain mum on Google-Yahoo? Don't bet on it.

Warren Cowan, chief executive of the U.K.-based search engine company Greenlight, spammed reporters Monday with his thoughts. But consider what he has to say:

"As far as the advertisers go, I don't see this as a good thing for the online advertising industry. We speak to major advertisers every day, and what they want is better returns, more distribution and less dependency on one provider. Likewise search agencies want to be able to diversify their clients spends and reduce risk too, and this deal doesn't deliver these to anybody. Whilst a Microsoft/Yahoo deal would have reduced the number of people in the market, it would have done much more to balance the options open to advertisers."

Should be fun tomorrow.

[The_Decider]

Why do you assume that the 20% that Yahoo has will automatically go into Google's market share or search?

Isn't this deal about advertising, not specifically search?

[darkr]

look at the yahoo/google deal

it brings ads into google searches
why pay the same company twice?

[someguy999]

while tomorrow will be a fun one as the author writes... the real fun day is going to be the august yahoo shareholder meeting.

it is about advertisments... with the double click purchase and now Yahoo its about as anti-competitive as possible 95% of the ad revenue filtering through google (and that's somehow not anti-competitive and better for consumers for choice?).

[Pete Bardo]

Well, there's always the supply and demand point of view. Google will have a larger ad inventory if this deal goes through, but the number of advertisers will stay roughly the same. The supply goes up, but the demand remains the same. That should translate into lower bids for advertisers.

[whas8020]

Look, first of all, Google's actual query share is only a little over 60%, NOT near 75% as you are suggesting. Their monetization "share" is higher than either YHOO or MSFT for one simple reason: Advertisers get better conversion rates on whatever it is they're offering. It's that simple.

Second, the Goo-Hoo outsourcing deal is just that, outsourcing of AD SERVES to Google, not the search itself. And it is completely reversible, unlike the decapitation/cherry-pick "we'll buy your search division" offer by MSFT. Yahoo gets better monetization while keeping the core search in-house.

Third, MSFT's argument that search is the gateway to the internet, is moot because clearly they are NOT saying that "paid search ads" are the gateway to the internet.

Given MSFT's feeble protestations in front of Congress today (I call it the 90% lie - 60% plus a PORTION of 20% still only makes 70-80%, unless they are already predicting and counting in their own shrinkage down to near 0 that is... which of course could happen... :), you get the feeling that they are increasingly screwed.

A deal is increasingly unlikely to happen (or it will cost too much for too little substantive benefit, likely the reason why Ballmer walked away in the first place).

And where is that fabled strategy that MSFT has going without YHOO that Ballmer spoke of?

Watch ComScores in a few days, I predict the Live Search Cashback "game changer" will have made nary a blip...

Read more analysis here:
http://businessmindhacks.com/post/microhoo-post-mortem-post-part-4-the-patient-is-not-quite-dead-yet

[guest86]

I hate Yahoo and love Google forever. Which is world's fastest speed? Answer: Google!!! I own Google everyday. No ads. ads = annoy pop ups. That what i found from Yahoo. Yahoo is sucks! Google winner and keep going. :-)