Digital News

Google/Yahoo deal off

Google has walked away from its proposed advertising partnership with Yahoo in order to avoid getting involved with a "protracted legal battle" with US Antitrust regulators.

The move has thrown Yahoo! into a tailspin as the arrangement with Google was created to help placate angry shareholders still upset over Yahoo’s rejection of Microsoft's $33 a share takeover offer, which valued the company at $47.5bn (£29.4bn). Shares are currently trading at $13.40.

The deal was struck in June with Google in an attempt to fend off an aggressive takeover bid from Microsoft and to provide a much-needed financial input into the ailing search giant. Yahoo! would have displayed search ads sold by Google and shared the revenue. A deal that could have been worth up to $800 million a year.

The decision by Google has prompted renewed speculation that Yahoo! will be forced back to the negotiating table in order to hammer out a new deal with Microsoft. Publicly though Microsoft has stated that it is no longer interested in doing a deal.

Google cites its desire to avoid a lengthy Antitrust legal battle with the US Justice Department as the main motivation for pulling out of the deal. The company felt unwilling to risk damaging its reputation or relationships with clients over the arrangement. With Google and Yahoo the top two search engines with more than 80% of the market between them, it’s more than likely that the US Department of Justice who had expressed concerns about a tie-up between them would have taken matter further.

“It's clear that government regulators and some advertisers continue to have concerns about the agreement," said David Drummond, senior vice-president and chief legal officer at Google.

Ever weakening, Yahoo! appears to be running out of both value and options.