Google pulls plug on Yahoo! deal

The advertising alliance between Google and Yahoo! has collapsed after the Justice Department indicated its intention to try to block the deal. ┬á┬á Earlier this year the Yahoo! board rejected a takeover offer of $33 a share from Microsoft, in a deal worth $47.5 billion, claiming it undervalued the company and that Yahoo! shareholders would be better served by the company following its own strategy.┬á┬á Part of that strategy was to hook up with Google in an arrangement where paid search ads from Google would appear alongside Yahoo! search results (those are the small text ads that appear in the page margin alongside the search results). ┬á┬á Yahoo expected the agreement to bring in up to $800 million in additional annual revenue. ┬á┬á The deal itself did not need regulatory approval, but Google said it would delay its implementation to give the US Department of Justice a chance to review it. Now Justice has expressed its opposition, Google has pulled the plug rather than face a protracted legal battle.┬á┬á GoogleÔÇÖs objectives may well have been met already, however, as it comes out of this episode as the only winner. Yahoo! has lost an opportunity for extra income, and its shares are now trading at around $13, so it must be ruing its rejection of MicrosoftÔÇÖs offer.┬á┬á Microsoft lost out on the opportunity to buy Yahoo!, partly as a result of GoogleÔÇÖs interference with this ill-fated ad deal. Was Google ever serious about it, or was it a clever ruse to scupper MicrosoftÔÇÖs takeover?┬á┬á Or will Microsoft have the last laugh by coming in for Yahoo! again at a knock-down price? CanÔÇÖt wait to see what happens next.  ┬á┬á┬á*┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á