Kara Swisher

Recent Posts by Kara Swisher

Google's Chilly Feet?

coldfeet

All week, Yahoo’s investors have waited for the other shoe to drop–its much-hyped ad deal with Google (GOOG), in which Yahoo (YHOO) would outsource some of its online search-ad monetization business to the search giant.

But will that deal land with a thud instead?

Today, The Wall Street Journal reports that Google executives “are now divided over whether to pursue a search-advertising deal with Yahoo.”

Actually, that depends what you mean by divided, of course, and which Google execs are on which side.

According to sources BoomTown talked to at Google, while there is a lively debate going on at the Googleplex over the ramifications of such a deal, it is more likely than not that the search giant will cut some kind of limited and carefully crafted deal with Yahoo.

Sources said that 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 No. 1 and No. 2 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, D.C., as the behemoth that it has actually become, something another behemoth–Microsoft (MSFT)–would surely love to have happen.

“Perceived concentration can be as bad as real concentration, which is not happening if we do a deal with Yahoo in the right way,” said one exec. “But that might be hard to explain clearly.”

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.

Google is still smarting over the brass-knuckle tactics Microsoft used in D.C. related to its DoubleClick deal, delaying its approval and causing Google a lot of money and time.

Already via that deal, its entry into the spectrum auction and its fight over copyright issues with media giant Viacom (VIA), Washington politicians and regulators can’t help but have the growing perception the Google is perhaps not as bouncy and fun and harmless as the company tries to project.

larrysergeyexerciseballs

In truth, Google is still bouncy and fun (see its founders Larry Page and Sergey Brin on exercise balls here).

But harmless? Not so much.

In a previous post, I argued that such a Yahoo-Google hookup is a bad idea for consumers, advertisers and anyone interested in a competitive landscape.

I wrote: “It is bad for advertisers, it is bad for consumers, it is bad for innovation, no matter how well-intentioned Google is.

And no matter how many flashy moves Google and Yahoo make, it is flat-out wrong for one player to so dominate such an important sector.”

In addition, some Google execs worry that since Yahoo is staying in the search business, while also outsourcing to Google, that it could gain valuable information about how Google operates.

wizardofoz

That’s a no-no at Google, which has what some in Silicon Valley call a “black box” image. In other words, please don’t pay attention to the man behind the curtain.

The less-grand deal, of course, will not be as good news for Yahoo shareholders, since it will not bring in the billion-dollar baby in terms of increased cash flow that some analysts had been bandying about.

And Yahoo is under pressure to come up with a lot of hits now that Microsoft has walked away–for now, at least. Now, it must go it alone, but much damaged by the takeover effort.

During the heat of the deal, such a link-up was seen as a coup for Google, which always likes to stick it to Microsoft.

And it was also seen as a way for Yahoo to better monetize its search business, especially since its own efforts have been so lagging behind Google in size, scope and yield.

And, more importantly, it gave Yahoo an effective weapon in fending off Microsoft’s unsolicited takeover bid.

Well, it worked, it seems, as the talks between Google and Yahoo were the bone that stuck in the throat of Microsoft CEO Steve Ballmer, much mentioned in his kiss-off letter to Yahoo last weekend.

Ballmer wrote, in part: “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 for a number of reasons.”

I doubt the aggressive Ballmer will let such a deal pass without a lot of heckling and, of course, much, much worse.

Please see this disclosure related to me and Google.


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The problem with the Billionaire Savior phase of the newspaper collapse has always been that billionaires don’t tend to like the kind of authority-questioning journalism that upsets the status quo.

— Ryan Chittum, writing in the Columbia Journalism Review about the promise of Pierre Omidyar’s new media venture with Glenn Greenwald