Could this be the beginning of the end for Yahoo? Yahoo’s interest in a search deal with Google was initially viewed as a poison pill move to thwart efforts of Microsoft to acquire Yahoo. I certainly saw it that way as did many others. Yahoo has continued down this path, announcing a deal with Google late Thursday afternoon. The deal basically outsources Yahoo’s search ad placement to Google AdSense. Hey, I use AdSense on my personal blog, so why shouldn’t Yahoo! The more the merrier I always say.
The big winner here is Google. Google gets a very large ad revenue opportunity, and they get a significant competitor to outsource parts of the money making end of Yahoo’s search business, the ad revenues. It’s a huge win for Google AdSense. There’s also signs of more partnering, now and down the road. Google and Yahoo will work together to make the instant messaging products work together. Both IM services have a pretty significant following, and the interoperability makes it easier to reach a broader base of customers.
The real question here is just where is Yahoo’s strategy headed now? Jerry Yang says this doesn’t mean Yahoo is exiting the search business, but rather is moving into the era of converged search and display… “the next big opportunity in the rapidly growing online ad industry” according to Jerry Yang’s blog post about the announcement. Isn’t that what Google already does? So, Yahoo is “moving full speed ahead to execute with speed, commitment, and passion” into outsourcing Yahoo’s ad display into Google’s core competency?
Maybe what this deal really represents is that Google and Yahoo are testing the waters with the SEC about a combined Google + Yahoo merger down the road. Honestly, other than Yahoo laying down their weapons in ad display and giving us the white flag of surrender, that’s the only way this deal makes sense long term. We most likely are watching the beginning of the end of Yahoo.
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