Friday, June 13, 2008

Yahoo! strikes an alliance with Google

"The enemy of my enemy is my friend" seems to be the rule at Yahoo! even when that means striking a stunning alliance with old-time rival Google. According to French news agency AFP and to CNN Money, the two companies came to an agreement for the US and Canadian markets, whereby Google would be able to sell advertising space on Yahoo's search pages. Aside from being an admission that Yahoo! stands no chance to compete head to head with Google in this space, the agreement is interesting in that it contains a provision saying that should Yahoo!'s ownership status change by way of an acquisition or other operation within the coming two years, the company would have to pay Google 250 million dollars.

That provision could be seen as an attempt to ward off any attempts to acquire Yahoo! for the next 24 months even though when a company like Microsoft is willing to pay over 45 billion USD to acquire Yahoo! I doubt 250 million would make a difference even if paid to archrival Google. I would personally focus my interest much more on the time horizon of the said provision because in my opinion it speaks volumes about the internal expectations of Yahoo! as to the time when its future strategic direction will have matured and started to deliver the first results. Microsoft's takeover bid most certainly was a wake-up call for top execs at Yahoo! Now of course, the question that remains to be sorted out is whether activist investors like Carl Icahn will give Yahoo! two years.