Google Tries to Turn Microsoft's Yahoo Pursuit to Its Advantage

Posted by: Rob Hof on February 3, 2008

The ironies keep piling up, but Google’s blog post today about Microsoft’s unsolicited bid to buy Yahoo looks to me like a smart chess move by the search giant. In the statement on the official Google blog, Chief Legal Officer David Drummond says the “hostile” bid (not sure it qualifies as hostile until Yahoo turns it down) “raises troubling questions” about whether Microsoft will turn its old monopolistic tricks to the Internet.

Which is ironic, because although Google is nowhere close to being considered a legal monopoly online, or even in online advertising, it certainly is dominant. And it’s using that dominance to try to move into new areas beyond search and search ads, from online display advertising to software as an online service.

And that’s not the first example of irony. Microsoft has been telling every antitrust official around the globe that Google is too powerful, helping to leave Google’s $3.1 billion proposal to buy display-ad serving firm DoubleClick in regulatory purgatory, first in the U.S. and now in Europe.

Now, Google’s using Microsoft’s bid for Yahoo as a way to plant fears of the old Microsoft—and, not least, try to take the pressure off its own regulatory challenges. I don’t know if it will work, but whether it’s a valid concern or not, it’s a savvy move by Google at a time when Google’s power is starting to work against it.

At the same time, the unusual appearance of such a statement, coming so soon after the bid was announced, indicates that Google is taking it very seriously. I and a lot of other people think such a deal would do little more than give Google more running room for the next year or two as antitrust and massive internal consolidation groans on. That’s why I think Henry Blodget’s suggestion today that Yahoo cofounder and CEO Jerry Yang try to persuade Microsoft to do a less sweeping linkup makes much more sense. (Though that doesn’t mean either company will take his advice. I don’t think Microsoft will back down, for one, and I don’t know that a semi-independent Yahoo will do any better than it has on its own.) But even if the blog post is a ploy to ease its own antitrust battles, the speed with which it responded would seem to indicate that Google believes this could be a potent competitor eventually.

I wondered if Google was just using the apparent threat, which actually isn’t much of one in the short term, as a way to push its DoubleClick deal through and keep regulators off-balance. But the Journal reports tonight that Google CEO Eric Schmidt called Yang Friday with an offer to help Yahoo fight the Microsoft takeover, either helping other bidders financially or taking over all or part of Yahoo’s search advertising for a lucrative fee. That seems to indicate Google views the Microsoft-Yahoo combination as a real threat.

Full text of the Google statement after the jump…

Yahoo! and the future of the Internet
2/03/2008 11:45:00 AM
Posted by David Drummond, Senior Vice President, Corporate Development and Chief Legal Officer

The openness of the Internet is what made Google -- and Yahoo! -- possible. A good idea that users find useful spreads quickly. Businesses can be created around the idea. Users benefit from constant innovation. It's what makes the Internet such an exciting place.

So Microsoft's hostile bid for Yahoo! raises troubling questions. This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation.

Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC? While the Internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies -- and then leverage its dominance into new, adjacent markets.

Could the acquisition of Yahoo! allow Microsoft -- despite its legacy of serious legal and regulatory offenses -- to extend unfair practices from browsers and operating systems to the Internet? In addition, Microsoft plus Yahoo! equals an overwhelming share of instant messaging and web email accounts. And between them, the two companies operate the two most heavily trafficked portals on the Internet. Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors' email, IM, and web-based services? Policymakers around the world need to ask these questions -- and consumers deserve satisfying answers.

This hostile bid was announced on Friday, so there is plenty of time for these questions to be thoroughly addressed. We take Internet openness, choice and innovation seriously. They are the core of our culture. We believe that the interests of Internet users come first -- and should come first -- as the merits of this proposed acquisition are examined and alternatives explored.

Reader Comments

purple

February 4, 2008 3:52 AM

It all boils down to
Microsoft = Evil
Google = Don't be Evil
How far are we willing to let the corporate hegemony go?

Praveen P.P.

February 4, 2008 4:24 AM

This is an appropriate remark in the wake of the proposed takeover. Internet is not the kind of place where they can do what they did with the PC.

As you rightly remarked, it is a platform characterized by openness, choice and one that truly encourage and nourish innovation.

I do not think that the cream of the society can be bulldozed by such unholy alliance with its bullying tactics any more; however great their financial muscle power may be.

Google should never play into the other side's game plan. You have gained this stature because of your stance on this fundamental principle.

You should never betray the guys who have reposed faith in you.

Anonymous

February 4, 2008 11:58 AM

This is not a matter of Microsoft taking over. This is a matter of Google wanting to be the monopoly and not wanting any other players to be allowed into the market to give them any kind of competition. Google should quit making accusations, continue on its own path, keep to its own business and allow Yahoo along with Microsoft to make their own decisions.

diane

February 4, 2008 4:05 PM

Openness of the internet?? What? Maybe they all should have thought of this before they all sold technology to the Communist Govenment of China. Those 1.3 billion people dont have "openness" Do they?

"Greed is Good" should be their motto not "Don't be Evil" Thats want they are EVIL

Shame on all of you, you have lost all our the trust and respect in you.

Dar

February 4, 2008 5:18 PM

The comparison of Google dominance and branching out and Microsoft acquiring Yahoo is not valid. Google's search dominance cannot and does not improve its ability to get someone to use gmail or docs. Those new directions will stand or fall on their ability to deliver value to the customer. on the other hand. Microsoft, once again, can leverage its monopoly on the desktop to embed Yahoo and search into the base OS and attempt the same strategy with search as it did with browsers.

Rudy

February 4, 2008 10:17 PM

I love the response from Google... try to thwart a "monopolistic ploy" of Microsoft by co-operating with Yahoo and lending a altruistic helping hand!

COME ON....

Are we really that blind to think that Google is ALL good! Let's be honest with ourselves and realize that Google IS the new Microsoft and they ARE the dominant internet force to be reckoned with!... cutesy logos and "don't be evil" motto's are just reflective window dressing for the true dominant internet machine.

Pick your favorite monopoly and place your bets... this could get interesting to say the least!

anon

February 8, 2008 10:24 PM

Whatever happens, we should be happy that MSFT has a true rival in GOOG - that there is such race - which benefits all of us consumers.

Prosper

February 14, 2008 11:00 AM

Micro$oft Vs. Gool
Sounds like Hillary Vs. Obama
Old Guard Vs. New

This is a match to watch.

Terrin

April 11, 2008 12:08 AM

Google is just paying Microsoft back for trying to hang up its DoubleClick deal. I suspect in the process Google will drive the price up that Microsoft has to pay, and maybe get some concessions from the government. Fight fire with fire.

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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