Google and Yahoo Deal is No More

Internet pioneer or not, Yahoo is quickly losing gusto in its attempt to hold on to its prominent second place in internet search. Will this latest news truly be the final nail in a coffin crafted for them at the beginning of the year?

When Yahoo was born there was nothing to stop it from dominating internet search. But as most things do in this technological era, Yahoo aged quickly. When Google arrived on the scene with a bigger, better system, the search engine had little trouble in taking the lead in internet search and advertising. And despite its continuing efforts to update and expand, Yahoo has faced consistent obstacles that have kept it from making much progress.

At the beginning of the year Yahoo founder and chief executive Jerry Yang and his company’s board rejected a deal that would have merged Yahoo and Microsoft. Microsoft takes a distant third place in search traffic and there was speculation that if the two companies merged, that combined they might be able to overtake Google. The merger rejection came as a big blow to Yahoo shareholders, who were counting on Microsoft to pay the promised $33 a share.

Yahoo promised shareholders that an advertising alliance with Google would deliver bigger rewards. The deal would have allowed Yahoo to show Google ads, and reap some of the revenue brought in by those ads. Google and Yahoo could have dominated the markets in display and paid search advertising, and the US Department of Justice warned that it would block the alliance if pursued.

Google simply walked, leaving Yahoo to wonder about its fate. Yahoo insisted that it could alter the deal, but Google said in a statement that it did not want to pursue a lengthy legal battle and “damage [the] relationships with valued partners”.

For Yahoo, this failed deal could be the final nail in its coffin. With a serious lack of revenue and shaky shareholders, Yahoo is facing a dire situation. In order to survive Yahoo will have to find cash quickly in order to stay competitive, and it is unclear how long Yahoo’s shareholders will hold out.

But Yahoo is not buried yet. Resurrection or re-incarnation are still possibilities, but in either case Yahoo will probably never look the same.