So, the awkward couple that was Google-Yahoo has succumb to peer pressure (okay, regulatory pressure) and broke up. Well, actually Google broke up with Yahoo, but who cares right? Oh yeah, all those investors who could have sold to Microsoft at $33 a share probably care (Yahoo closed at $13.92 today).
How Mr. Yang and Co. were able to placate some very big time investors with a measly $500 million in forecast revenue from the Google partnership was an amazing sales job to begin with. Now, it has vaporized and Jerry must be thinking he should have stayed retired or at least checked his ego at the door when negotiating with Microsoft.
A mass email from Yahoo EVP Hillary Schneider a few minutes after reading about the break-up this afternoon demonstrated Yahoo’s lack of customer awareness on the subject. Why she or anyone else at Yahoo felt the need to reassure any advertisers after this news got out is perplexing. Most advertisers I had spoken with on the topic were hoping this would be the ultimate outcome. The last thing anyone wanted to see was a less competitive marketplace and a stronger Google.
Back in July of this year, I was treated to a convoluted presentation by a Yahoo SVP about how this partnership was all going to work out strategically and logistically for Yahoo, and what the impact it would have been to advertisers on their search platform. It was quite frustrating as I and others in attendance tried to get basic questions answered, but were either rebuffed in the guise of legal disclosure issues or simply by Yahoo admitting their plans were not yet flushed out.
There were two very clear things that emerged from this meeting however. 1) A lot of Yahoo internal people, both rank and file and executive level had serious questions of their own regarding the Google deal. 2). Yahoo executives either had no clue how they would actually implement the Google program or they knew the plans they had in place would not sit well with core advertisers.
In the end, it all comes down to what really was the core driver behind this partnership to begin with. Was it a jab at Microsoft for not meeting Yahoo ridiculous demands during the purchase negotiations? Perhaps it was a ploy to get them back to the bargaining table? The $500 million in forecasted annual revenue was nothing to sneeze at, but hardly anything that was going to move Yahoo stock price more than a couple of points in the positive direction.
For Google, the benefits were obvious; they got to stick it to two rivals at once and make more money and capture more market share in the process. It would have been a brilliant deal for them. However, once the federal regulators got involved, you could sense that the honchos at the Googleplex didn't feel the incremental revenue share volume was worth harming their brand with advertisers and making the jobs of their D.C. lobbyists more difficult. It was easy for them to pull the plug and tell Yahoo they needed some alone time.
Mr. Ballmer, the bidding is to you at $21 a share...
