Lot’s going on about the deal between Yahoo! and Google.  Google even setup a page about it. The deal is definitely bad for consumers… something like  Costco or WalMart annihilating every nearly every grocery store, including your very own local spot.  Only in this case it’s on a massive scale where the distribution of media, content and the ads you interact with everyday are essentially only a few steps away from being controlled by just 1 large player.

In this agreement, a portion of Yahoo!’s search and content inventory will actually serve Google sponsored ads in addition to Yahoo!’s. The situation gets gets even worse on a corporate level:

  1. Google is coming close to “evil empire” status. I’ve written about the possible consequences of Google becoming that “one guy” we’ve all seen taking home leftovers from the all you can eat Chinese buffet.  I’m sure it’s lonely on top.  But rather than focusing on what makes them great in the eyes of the world – like enhancing a few key products and innovating killer new ones – they’re stalking out competitors in a take all or nothing approach, with the capacity to destabilize the internet.
  2. Ruins margins for publishers. Totally out of Econ 101: Google’s massive inventory of traffic and ad distribution via publishers gives them too much power in controlling prices.  Everyone knows that Google takes a much larger commission of ad revenue from publishers hosting AdSense ads than affiliate networks performing the same service.  No doubt Google can get away with this and still compete against performance based networks given their superior optimization technology, bidding system and reach.  It’s an explosive combination for any single entity to take an even larger portion of search traffic which strengthens their control over pricing.  The results will certainly put publishers in a more vulnerable and reactive position in addition for possible regulation calls.
  3. Another strong blow for Yahoo as a player. A possible deal between Yahoo! and Microsoft had the chance to maintain a competitive landscape in high volume search potrals as well as the internet as a whole.  With dismal results and the subsequent board room drama that still ensues – Yahoo! is only a shadow of player it used to be in terms of validating a much needed higher value share price on paper.  This deal not only downgrades their position, but literally sells their inventory/client base to their biggest competitor.  Where are they going to be in another 12 months?  Who else can step up to the plate and maintain a competitive online media environment?

The Yahoo! Google deal is just another another desperate and cheap attempt by Yahoo! to raise stock value in hopes of landing some magic deal.  Time will tell if this is their first step in becoming a giant Google Adsense publisher.