Posted by: Rob Hof on April 17, 2008
Oh, please. An initial test of outsourcing Yahoo’s search to Google showed positive results, according to an account in the Journal. Hold it; didn’t that test just start this week? Wasn’t it supposed to go two weeks? Didn’t we already know that Google ads work better than Yahoo’s?
Yes, indeed. That’s why I’m a little suspicious of the “people familiar with the matter” who are saying this could lead to a wider deal between the two companies. It’s certainly in Yahoo’s interest to show Microsoft it has another option, and it’s certainly in Google’s interest to throw a monkeywrench into any Microsoft plan.
But we’re supposed to believe that after Yahoo spent years battling Google to little avail, after having multiple chances and much Wall Street encouragement to outsource its search ads to the leader, suddenly Yahoo and Google are now going to be best buddies? After a couple of days of ad tests?
Supposedly, they’re even plotting to avoid regulatory problems by limiting the deal to “specific groups of search queries or regions.” If the point for Yahoo is to show how much more money it could make outsourcing search ads to Google, that makes no sense. Even the $1 billion a year that Citigroup thinks an outsourcing deal could add to Yahoo’s cash flow probably wouldn’t sway Yahoo shareholders staring at a $45 billion Microsoft buyout offer, so why would some smaller portion of that sway them any more?
Of all the back-and-forth negotiating tactics we’ve seen in this overlong Kabuki dance so far, this one takes the cake. Maybe it will help Yahoo ultimately extract a few more dollars a share from Microsoft, and if so, more power to them. But these moves are getting so transparent that you have to wonder how effective they are.