Microsoft opposes Yahoo-Google deal, reveals another rejected stake plus search offer

14 June 2008

After years of being derided as the ''big bad wolf'' of software monopoly by competitors, Microsoft finds itself on the other side of the fence as it cries ''wolf'' over Yahoo's advertising deal with Yahoo, which Microsoft asserts, will ''increase prices for advertisers and start to consolidate more than 90 per cent of the search advertising market in Google's hands''.

There have been two new developments in the ongoing saga which started with Microsoft's unsolicited offer for Yahoo on 1 February this year. After Yahoo rejected Microsoft's overtures, not once, but twice, Microsoft CEO Steve Ballmer called off the deal and Yahoo sidled up to Microsoft's arch rival Google. (See: Yahoo strikes $800-million ad deal with Google, ends talks with Microsoft)

Now latest reports indicate that Microsoft is lobbying regulators to scuttle the Yahoo-Google, and more  surprisingly, it had made a third offer of a partnership to Yahoo after the latter had declined takeover proposals.

As for the first development, it was not unexpected considering the vehemence with which Microsoft had opposed Google's acquisition of Doubleclick some months back (See: Google clears last hurdle to acquire DoubleClick; Closes deal for $3.1 billion) . Microsoft feels, and rightly so, that the Yahoo-Google deal would further increase Google's dominance over it in cyberspace, pushing it further back in the search advertising market. But will it be detrimental to advertisers and consumers, as Microsoft claims? That is for the US regualators and courts to decide.

In its effort to stymie the deal, Microsoft has already contacted advocacy groups that work to influence policy in Washington. Specifically, Microsoft says that the deal is akin to a price-fixing agreement, with Google and Yahoo effectively setting a minimum price for advertisements on some key word searches. It also believes the arrangement will lead to the demise of Yahoo's own search advertising business, eliminating a competitor to Google's dominance on the Internet.

Microsoft later said in statement its lobbying approach "reflects our belief that we have a responsibility to engage with policymakers on issues that impact our products, customers, shareholders and the industry overall.''