Google Abandons Yahoo Ad Partnership Over DoJ Challenge

Search giant Google has announced that it will dump the internet advertising agreement it had with Yahoo after facing fierce criticisms from customers, rivals and regulators who saw the Google/Yahoo alliance as being resolutely anti-competitive.

The Department of Justice had already said that it would be investigating the implications of the alliance which would corner more than 90 percent of the internet and search advertising market in the US.

Yahoo could lose more than USD 800 million in annual revenue from the Google advertising deal.

The move prompted a massive upswing in Yahoo's share price which was up by more than $1 before closing at $13.92 (ed: and falling steadily in after hours trading) as rumours of enewed Microsoft interest in acquiring the struggling internet company cropped up during the day.

And in a statement following Google's announcement, Yahoo said that it "continues to believe in the benefits of the agreement and is disappointed that Google has elected to withdraw from the agreement rather than defend it in court."

But Google's tepid attempt to keep Yahoo out of Microsoft's mitts might have actually played in favour of the latter as Yahoo's shareholders get angry at yet another formidable blow that will almost certainly bring their company's valuation down.

Back in May 2008, Microsoft offered to buy Yahoo for $33 per share which the company then refused saying that it "undervalues" the company and with this latest setback, many think that Yahoo may have lost its only hope of recovery.

Analyst Henry Blodget from Silicon Alley Insider went on record to say that, given the current economic conditions, Microsoft could well wait till Yahoo completely implodes before possibly picking out the best bits for a bargain.

One, however, cannot help but think about a conspiracy theory in which Google would force Yahoo to go to Microsoft.

This would allow Google to buy time as the two companies struggle to accommodate new people, new cultures and new technology in a mother of all acquisitions that would rival the likes of HP/Compaq.