Google has announced it is scrapping its proposed advertising sales partnership with Yahoo! after the US Department Of Justice indicated it would move to block the deal over competition concerns.
The deal would have seen Yahoo! hand over some of its advertising space to the market leader Google, and take a cut of any ad revenue created. Yahoo! was hoping the tie up with Google would boost its overall ad revenues and help strengthen its business position, which was weakened earlier this year by Microsoft's previously reported attempted takeover. Although Yahoo! bosses successfully fought off Microsoft's takeover attempts, in doing so they pissed off many investors who supported the merger.
Yahoo! hoped that the Google advertising tie-up would provide some financial security and convince its shareholders that it had acted in their best interest by knocking back Microsoft's approach. Google were keen for a Yahoo! tie up to stop it merging with a Microsoft and, in doing so, creating a massive new competitor in the web services space. But the DoJ fear a combined Google/Yahoo! sales offer would give Google too much dominance in the internet advertising market.
Yahoo! said in a statement yesterday: "Google notified Yahoo of its refusal to move forward with implementation of the agreement following indication from the Department of Justice that it would seek to block it, despite Yahoo's proposed revisions to address the DoJ's concerns. Yahoo continues to believe in the benefits of the agreement and is disappointed that Google has elected to withdraw from the agreement rather than defend it in court".
Assuming Yahoo! can't continue without some kind of merger or strategic partnership with a competitor, some now reckon some kind of Yahoo!/AOL deal is most likely.