Google really wants to make sure that Microsoft won’t get their hands on rival Yahoo. So much so that they’re willing to enter and expand an advertising partnership with Yahoo, that may prevent Microsoft from renewing any bids for the company in the future.
By making sure that Yahoo does well, Google is ensuring that it won’t fall into the hands of Microsoft, who is eager to take over Yahoo in an attempt to seriously compete with Google.
At a press round table before Google’s annual shareholders meeting on Thursday, Google co-founder Sergey Brin said, “We were a big partner of Yahoo a few years ago. It’s great to be working with them again.”
Google CEO Eric Schmit also spoke with the press, and said “We have had a brilliant test which was two weeks long.” However, he declined to comment on whether they were discussing a full-fledged agreement. Analysts, however, have speculated that the two companies are nearing a more permanent arrangement, and that they have even presented plans to antitrust authorities to ward off any concerns.
In April, Google and Yahoo tested out displaying Google ads on some of its popular web properties, and shared the revenue from the ads with Google. Based on Eric Schmidt’s comments, that test went extremely well.
You will never hear Google say it, but it also worked out well for Google in another way. The test is reportedly one of the reasons that Microsoft CEO Steve Ballmer decided to with draw their bid for Yahoo and terminate negotiations.
“We regard with particular concern your apparent planning to respond to a ‘hostile’ bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid Internet search terms offered by Yahoo! today. In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo! undesirable to us,” Ballmer previously stated.
Negotiations between Microsoft and Yahoo ended on May 3, when Microsoft formally withdrew its bid. Microsoft had raised the bid from its initial $31 per share price, up to $33 per share. This, however, did not satisfy Yahoo board members, who were reportedly holding out for at least $37 per share.
Following the news that Microsoft had stopped negotiations, Yahoo stock tanked more than 14% the next morning. A longer term deal with Google could help Yahoo turn things around, and rebuff any ideas that Microsoft may have had of picking up Yahoo for a cheaper price later this summer.