It’s like an adolescent coed party: The spin of the bottle is about to seal Yahoo!'s (Nasdaq: YHOO) slobbery fate. Pucker up, Yahooligans! It's time to kiss Google (Nasdaq: GOOG).
Google is gearing up to begin serving its paid-search ads on Yahoo!'s search results come October, according to Google CEO Eric Schmidt.
In a Bloomberg Television interview last night, Schmidt explained that government approval is the one unknown variable that may get in the way of pairing. It's good to know that cold feet aren't playing a role here.
Yahoo! turned heads in April when it announced that it would be testing Google's AdSense program, serving up relevant text ads to increase the monetization of its page views. The test proved successful, but Microsoft (Nasdaq: MSFT) urged regulators to check the pairing for potential antitrust issues.
Google commands 60.2% of the country's search-engine market, according to Nielsen Online. Yahoo! clocked in at a distant second last month, with a 17.4% slice.
The two unlikely partners insist that Yahoo! won't be handing over all of its ad traffic to Google. Yahoo! is a leader in display advertising, and it's unlikely to completely abandon its paid search product.
"Yahoo! has made it very, very clear they're going to take the best parts of their network and ours and combine them," Schmidt said.
The deal makes perfect sense, since it will increase the money that Yahoo! can squeeze out of its traffic with Google's deeper bench of text ads. That also presents the rub for regulators. If they nix the partnership -- one that others like Time Warner (NYSE: TWX), IAC (Nasdaq: IACID), and News Corp. (NYSE: NWS) currently enjoy -- it would deny Yahoo! the grander profitability power that nearly everyone else enjoys.
If there is any surprise to the fact that this deal is still alive, it's that it was born as a knee-jerk reaction by Yahoo! to shake off Microhoo. Now that Microsoft appears to have no interest in pursuing Yahoo! as a buyout candidate, the deal with Google doesn't appear to be as pressing in order to appease shareholders.
However, shareholders do need a little massaging here, and that's where a deal like this -- that would prop up Yahoo!'s earnings without forcing the dot-com pioneer to shed its independence -- clearly matters.
Given an unfortunate scarcity of kissable partners for Yahoo! right now, the bottle says it's time to smooch.
Other ways to spin the content bottle:
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