Yahoo, Google May Walk Away From Search Pact

The planned advertising partnership deal between Google (NASDAQ:GOOG) and Yahoo (NASDAQ:YHOO), devised during Microsoft’s (NASDAQ:MSFT) unsolicited bid for the Sunnyvale, Calif-based co., may not take place after all.

Citing people familiar with the matter, the Wall Street Journal reported that following a Thursday meeting with the Justice Department both internet companies could abandon the pact as early as the middle of next week if differences with regulators are not resolved.

The Journal notes however, that the companies could reach a settlement with regulators if they sign a consent decree. Which will mean, in part that Google would have to be subjected to more government oversight over its business practices. Something obviously the Internet search giant is not eager of doing.

Google will most likely walk away from the partnership. It can afford to do so. The new question now is whether this latest development will hasten Microsoft’s return with another Yahoo bid?

The proposed partnership deal, which would allow Yahoo to start displaying search ads sold by its rival, has drawn intense criticism from advertisers, who fear Google’s increasing dominance. Last month, the Association of National Advertisers warned the Justice Department that a Google-Yahoo partnership would leave advertisers with fewer options for placing online ads. The Association also stressed that the deal would diminish competition and allow Google to further solidify its control over the search advertising market.

Google and Yahoo however, disagree with these assessments and insist that the partnership as currently structured would serve advertisers and users more efficiently. In spite of their efforts both companies have failed so far to convince opposing opinions.

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