Yahoo in online test with Google ads
Yahoo to Microsoft: We've got options. Trying to fend off the software giant's unsolicited takeover bid, Yahoo said Wednesday it plans to...
Los Angeles Times
SAN FRANCISCO — Yahoo to Microsoft: We've got options.
Trying to fend off the software giant's unsolicited takeover bid, Yahoo said Wednesday it plans to experiment with putting ads from Google in its Web search results.
The test, which Yahoo said was limited and would last only two weeks, marks a rare public acknowledgment that the Internet company has been talking with its top rival as it seeks ways to avoid accepting Microsoft's roughly $40 billion buyout offer.
Yahoo is also near a deal with Time Warner's AOL to combine their Internet operations, The Wall Street Journal reported Tuesday evening, citing people familiar with the situation.
If that deal moved forward, Time Warner would take a 20 percent stake in Yahoo and make a cash investment; Yahoo would then buy back billions of dollars of its own stock at a price between $30 and $40 a share, the newspaper said.
Yahoo and Google for years have discussed using Google's technology to power some of Yahoo's search results, but talks have heated up since Microsoft made known its intentions to acquire Yahoo two months ago.
"Yahoo is trying hard to not just go to Seattle," said a person close to Yahoo's top management, who requested anonymity because talks are confidential. "They are trying to see if this really does work for the business. If not, it's a great negotiating ploy."
Legal experts have said a broader Web-search deal between Google and Yahoo would face tough antitrust scrutiny. It also wouldn't preclude Microsoft from acquiring Yahoo.
But it could give Yahoo more ammunition to argue it can revitalize its business without selling to Microsoft.
Sunnyvale, Calif.-based Yahoo faces the daunting task of trying to convince shareholders that it's more valuable as an independent company than as part of Microsoft.
Microsoft on Saturday threatened to launch a proxy fight, nominate its own slate of directors to Yahoo's board and lower its offering price if the companies didn't reach a deal by April 26.
In a brief statement issued after the markets closed, Yahoo said Google ads would adorn no more than 3 percent of its search results and would appear only to visitors from its U.S. home page.
Yahoo said the testing didn't "necessarily mean" it would become a full-fledged partner of Google's advertising program "or that any further commercial relationship with Google will result."
"As previously announced, Yahoo's board of directors is exploring strategic alternatives to maximize stockholder value, including exploration of potential commercial business arrangements," the company said.
Microsoft responded quickly, raising concerns that competition would suffer if the Web-search market's two biggest players reached a broader deal.
"Any definitive agreement between Yahoo and Google would consolidate over 90 percent of the search-advertising market in Google's hands," Microsoft said in a statement.
"This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo. We will assess closely all of our options."
Government officials are also paying attention. Sen. Herb Kohl, D-Wis., chairman of the Antitrust, Competition Policy and Consumer Rights Subcommittee, said he would be "following closely" the results of Yahoo's test with Google.
"Should there be moves to make this agreement permanent, we will examine it closely in the antitrust subcommittee to ensure that it does not harm competition," he said.
"Following closely on the heels of Google's acquisition of DoubleClick, this Google-Yahoo alliance would represent even further consolidation in the Internet advertising market."
Material from Bloomberg News is included in this report.
Copyright © 2008 The Seattle Times Company
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