How Google Killed Microsoft’s Bid for Yahoo

Posted on May 5, 2008 .

We all know that for months, Microsoft tried to gobble up Yahoo, and that Google, the reason Microsoft went after Yahoo in the first place, was not going to sit by and let that happen. Ultimately, Microsoft walked away from it all. But what role did Google play in thwarting Microsoft’s bid?

Miguel Helft of the New York Times has written a somewhat detailed article about the role that Google played in Microsoft’s failed bid for Yahoo. Here’s part of the article:

Microsoft and Yahoo were pushed to the brink of a multibillion-dollar marriage and then to a sudden breakup this weekend by the same player. It was Google, in the odd dual role of both unwitting matchmaker and self-interested spoiler.

Google’s phenomenal rise, after all, prodded Microsoft, the dominant technology company for more than two decades, to court Yahoo. And Google’s success also weakened Yahoo enough to give Microsoft the sense that it could buy the company at a good price.

A combined Microsoft-Yahoo would create a powerful competitor, and Google early on indicated that it would fight the merger on antitrust grounds in Washington and Brussels.

But Google played a part in killing the deal, for now at least, by acting more as friend than foe. It offered to let Yahoo use its more sophisticated search advertising technology, which by some estimates would have meant $1 billion in additional cash flow a year for Yahoo. The partnership would also bring Google more revenue.
The prospect of such a partnership emboldened Yahoo’s board to demand more money for the company and eventually caused Microsoft to rethink its strategy.

You may read the rest of the article here.