Yahoo may align with Google against Microsoft's takeover proposal
On Friday, we reported that Microsoft was attempting to acquire Yahoo, offering the company $44.6 billion for the takeover. Google isn't taking the new threat lightly, so Google's CEO Eric Schmidt called Yahoo's CEO Jerry Yang on Sunday.
Context & Ripple Effects
Microsoft's confirmed $44.6 billion offer put Yahoo in play, and within days Google moved from spectator to participant: Eric Schmidt personally called Jerry Yang on Sunday, following the Wall Street Journal's earlier report that Google had reached out (Google reaches out to Yahoo). The Download Squad framing is that Yahoo may align with Google specifically as a defense against the takeover.
The idea has history: talk of Microsoft pursuing Yahoo surfaced as far back as May 2007 (rumors of a Microsoft-Yahoo deal), so this week's formal bid converts a year of speculation into a live negotiation. The story traveled widely — the Wall Street Journal and CNET both picked it up the same day, with CNET citing Yahoo insiders who see the bid as better than stagnating alone.
First-order effects
- Yahoo's board now has a second path besides accepting or rejecting Microsoft outright: a reported (and unconfirmed) alignment with Google would let it stay independent by deepening its search-advertising relationship with Google instead of selling.
Second-order effects
- A Google-Yahoo combination in search ads would concentrate the market Google dominates even further, inviting antitrust scrutiny and forcing Microsoft to raise its price or argue regulators down rather than simply outbidding rivals.
Third-order effects
- If defensive alliances become the standard answer to unsolicited bids among the big web platforms, takeovers shift from pure price negotiations to contests over which partner can credibly block whom — with regulators as the deciding third party.
The trend: Web portal consolidation is turning search advertising into a two-bloc contest between Microsoft and a Google-aligned Yahoo, with each acquisition attempt triggering counter-alliances rather than straightforward auctions.