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    Will Google’s Concerns About AOL Extend to Yahoo?

    By
    Clint Boulton
    -
    August 8, 2008
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      When I read that Google filed a quarterly report in which it said its $1 billion investment in AOL may be impaired, the first thing I thought was, gee, you think?
      AOL has been on a backward slide for awhile and, heartened as I was to see its willingness to fight it out in the online ad space with acquisitions like Bebo, I have to wonder what the company’s future chances of surviving are.

      It might be best for Microsoft, or someone, to buy them and make the advertising game a little more interesting versus Google.
      What this bad bit about AOL made me think of was how this portends for Yahoo? The deal between Google and Yahoo is barely two months old, but it bears some resemblance to the search advertising deal Google inked with AOL when it invested in it two years ago.
      As part of that investment, Google renewed a search advertising deal with AOL dating to 2002, running Google’s paid search terms on its portal. Yahoo and Google struck a similar deal in June to keep Microsoft from Yahoo’s door.
      Assuming it passes muster with the government, Yahoo will run Google’s search and contextual advertising technology through Google’s AdSense for search and AdSense for content advertising programs on the Yahoo search engine.
      While this deal is reported to give Yahoo $800 to $1 billion a year in revenues, Yahoo’s future, like AOL’s, is equally uncertain.
      Yahoo’s earnings have failed to please. Its stock has fallen around $10 since Microsoft made its bid known. Yahoo’s shareholders are incredibly unhappy with the management team in the wake of the latest board-vote-counting gaffe.
      People in the company are being shifted around from one organization to another to plug the gaps left by those who, well, left. It sounds like total chaos. I have employees venting to me about how bad things are over there. It’s not pretty.
      The company has several new irons in the fire, some of which are simmering well, some of which have barely started to bubble.
      Yahoo SearchMonkey and Yahoo Search BOSS (Build your Own Search Service) open search platforms are nothing if not evolutionary for the search space, allowing programmers and programming teams to leverage the Web using Yahoo’s infrastructure.
      The Yahoo ad platform seems destined to keep Yahoo ahead of the curve in display advertising, and the plan to “rewire” Yahoo’s Mail platform as a social network is neat.
      But will any or all of these things bear enough fruit to keep Yahoo customers happy and raise shareholders’ confidence in the company, while competing with Google and Microsoft? These are tall orders.
      What if use of Yahoo’s search engine drops and more users go to Google, Microsoft or one of the other two dozen search startups? Surely, that would diminish the number of clicks of Google keywords on Yahoo’s search engine.
      This would lower the value of the deal and could give Google pause to reconsider it.
      So, while we’re all still considering the declining value of the Google-AOL deal, which once seemed impregnable, let’s not forget that the new Google-Yahoo agreement, assuming it passes muster, may not reach the end of its initial four-year life.

      Clint Boulton
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