Google – Yahoo Deal Getting Cold Feet

Well, it is Yahoo again! – Google executives, based on a latest report from The WSJ – “are now divided over whether to pursue a search-advertising deal with Yahoo”.

As it is widely known by now, in a last-ditch effort to avoid a merger with Microsoft, Yahoo last month ran a two-week test, displaying some of Google’s search ads on its homepage.

The executives of both companies said the experiment went well and they were considering teaming up in a search advertising deal to outsource Google’s search technology in a non-exclusive arrangement.

However, the lively debate going on at the Googleplex right now is focused over the ramifications of such a deal.

According to BoomTown sources at Google – the structure of the deal is critical, especially making it non-exclusive, limited and also low-key, given the scrutiny related to antitrust issues such an arrangement between the number-one and number-two companies in Web search will surely and deservedly bring from government regulators.

Some Google execs are very worried about calling further attention to the company in Washington and the European Union, as the behemoth that it has actually become, something another behemoth–Microsoft–would surely love to have happen.

Only last month Microsoft’s Brad Smith lashed out at Yahoo and Google for partnering even in a limited test. He argued that a Google-Yahoo combination would give Google a 90% share of online search advertising and that “this would make the market far less competitive. It would be fair to say that Microsoft would aggressively lobby against a long-term partnership between Google and Yahoo” he said.

While Google execs think that a properly structured deal will pass muster, they are also worried that it might not be worth the damage to the company’s image that might come with a bruising fight over the issue.

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