Echoes of newspapers' survival strategies — and it may not work this time, either
SEATTLE - Are the Internet giants going the way of newspapers in the 1970s and 1980s, when papers started consolidating and signing joint-operating agreements to sustain themselves?
The Yahoo-Google deal sounds like a step toward a JOA, a federally approved joint-operating agreement like the one between The Seattle Times and the Post-Intelligencer.
This is a gross simplification, but in these cases the stronger entity takes over business operations for a weaker partner, which continues to produce a separate editorial product.
Lawyers had the upper hand writing the Yahoo-Google announcement about a partnership, but basically Google's going to start handling ads that appear on Yahoo's pages - just as The Seattle Times sells and places the ads that appear on the Post-Intelligencer's pages.
But Yahoo didn't go all the way. It's still going to handle some ads. It's also going to decide which search terms and pages are handled by Google's ad machine, and which ones are handled by Yahoo's relatively new "Panama" ad system.
That may stave off antitrust regulators (although the Senate's antitrust subcommittee chairman, Herb Kohl, D-Wis., is already vowing to "closely examine" the deal) and preserve some of Yahoo's dignity. But it will probably also confuse the heck out of advertisers.
Will they bother to sort out which ad system is placing their ads where, or will they simply migrate to Google, thinking that will get their ads distributed onto both Google and Yahoo networks?
Until they get a clear message about what's happening, it undermines the alleged simplicity and precision of their ads.
If this torpedoes Panama, will Google take over the rest of Yahoo's ads?
Yahoo expects the deal will increase its cash flow by roughly $20 million to $40 million a month in the first year. Had it peaked otherwise? Will this cover up whether Google's search business is starting to peak as well?
I'll bet Microsoft senses that peak. That's probably why it's no longer offering top dollar for Yahoo and willing to watch and wait for Yahoo's value to fall, before pouncing again.
Consolidations and JOAs preceded the decline of newspapers' grand monopoly. It's not much consolation to papers, but the Yahoo deal suggests the Internet giants steamrolling them aren't all invincible.