Yahoo dismissed Google tie-up before Microsoft bid

 

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By Reuters

Posted on 3 Jun 2008 at 10:23

Yahoo dismissed a search-advertising deal with Google due to antitrust concerns, the day before Microsoft made its takeover offer, according to court documents.

Considering whether Yahoo should outsource its search-ad sales to Google, executives argued that any short-term gains would derail Yahoo's long-term push to become a "must buy" for advertisers.

These comments are striking when set against Yahoo's subsequent decision to conduct a test with Google, which saw Google place advertising alongside 3% of Yahoo's search results.

The turnabout was part of a strategy by Yahoo management to seek alternatives for its business instead of settling for Microsoft's cash-and-stock offer at $31 per share, which the company's board had rejected as undervaluing Yahoo's assets.

Microsoft challenged the possible Google-Yahoo tie-up as anti-competitive, citing Google's growing dominance of the web search business and its even larger share of ad sales tied to web search results. Government regulators also rushed to say they would investigate any Google-Yahoo partnership.

The position came to light in a complaint filed by attorneys representing two Michigan pension funds in a shareholder lawsuit that aims press the company to renew merger talks with Microsoft.

A company spokeswoman would not comment on papers revealed in the case.