Yahoo and Microsoft at it Again?

After publicly claiming that they were through dealing with Yahoo! and had pulled all deals off the table, Microsoft would neither confirm nor deny that they had started talking to them again. This is tantamount to admitting that they are, since the ‘no comment’ stance is different than the ‘we’re through, period’ stance.

In the convoluted mess that this whole saga has become, I suppose nothing should surprise us. So eager was Yahoo! to ward off stockholder revolts and stay independent of Microsoft that they signed on with Google to use Google’s search advertising platform. This is stunning for two reasons:

1. The likelihood of this passing regulatory scrutiny is low (unless they know something that I don’t), since together Yahoo! and Google combined would control over 80% of the online advertising market.
2. Yahoo is basically admitting that their $1.63 billion purchase of Overture in 2003 (and all the subsequent R&D dollars that have gone into the ad-serving platform since then) were all for naught.

Item #2 is particularly interesting, since Overture, and subsequently Yahoo, had a huge head start in the paid search space. Adwords Select, the first pay-per-click model from Google, launched in 2002, while GoTo (the former name of Overture) launched four years earlier. What a message for Yahoo! to send to the world – we just aren’t as bright as those Google guys, and we’ve given up trying to be.

I wouldn’t want to be in Jerry Yang’s shoes right now…

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