How the Google-Yahoo Deal Went Down

By Clint Boulton  |  Posted 2008-06-13 Print this article Print

The best nugget from Google's conference call about its search outsourcing deal with Yahoo came last, as in, during the last question.

Asked how the deal, which allows Yahoo to run as many or as few Google ads on its U.S. and Canadian properties, came to fruition and what affect Microsoft had on it, Google CEO Eric Schmidt provided the most detailed response on the roughly 17 minute-long chat with financial analysts.

First, Schmidt refused to admit Microsoft had any bearing on the pact, but in the next breath he said talks with Yahoo about a deal began in early February, making it clear that Microsoft was the impetus for the deal. Microsoft made its bid Feb. 1. The only question is how fast Schmidt dialed Yahoo CEO Jerry Yang on his iPhone.

Schmidt went on to say the executives between both companies had social relationships over the years. This is true. Earlier on the call, Google co-founder Sergey Brin reminded everyone that he, Google co-founder Larry Page and Yahoo's Yang and co-founder David Filo went to Stanford together.

At Yang and Filo's encouragement, Brin and Page turned Google into its own business, even partnering with Yahoo in 2000 to provide search for the company.

"We began by saying 'Is there a partnership that would make sense? Is there one that is strategic to both companies and in particular a partnership that would allow Yahoo to remain independent."

Then Schmidt turned cloak-and-dagger like, noting that the executives met in an "empty building that Google owned in an unknown and unfindable location for most of us." Apparently, Yang, Schmidt Yahoo's Sue Decker and others showed up, sometimes on bicycles.

Does that sound like a bunch of kids meeting at the treehouse club or what? You can't make this stuff up.

Schmidt said that over the last few weeks the he and Yang spoke frequently about "pulling this thing off" and it came together over the last week and the deal was signed "just a few hours ago."

A chicken or the egg question that went unanswered: did Yahoo and Google ink their deal before or after Yahoo declared talks with Microsoft dead?

I bet they had the deal ready to go and then Yahoo had it in its mind to have one more obligatory meeting with Microsoft with no intention to strike a deal with the software giant.

The minute that meeting ended, I bet Yang phoned Google to commence signing the deal. Google unveiled it at 4 p.m. PDT, a bit later than TechCrunch and others originally reported.

Some other nuggets on the call: Google was asked if there was an option to run Google display ads on Yahoo's network, Yahoo being of course the display ad market leader with a solid but not overwhelming 20 percent share.

"We looked at a lot of configurations like that. We settled on this one because it was the most straightforward way of doing business," Schmidt said. "Certainly, we'd love to do more business with Yahoo over time."

Earlier, Schmidt had said Google believes its DoubleClick unit would boost its display ad share, but don't rule out Google display ads on Yahoo.
Also: Google's Vice President and General Counsel Kent Walker said that Google has spoken to the Department of Justice about the deal and what it means to the market, but that no talks were held between Google and the European Commission for the same reasons. |

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