The saga of where Yahoo! is headed took another turn when Google decided that it was not worth the federal scrutiny for Google and Yahoo! to work together. Clearly to the two largest search engines working together meant an increase in revenue for Yahoo! Microsoft a spurned suitor made it clear that it did not want Google and Yahoo! working together. As well, the Department of Justice (DOJ) has been reviewing this joint marriage since it was first announced.

How Did the Elections Impact the Cancellation?

Google’s decision to abandon the Yahoo! deal happened a few days after the election. However, Google CEO’s Eric Schmidt campaigned for President-Elect Obama, so one might have concluded that Google would have continued with this deal. In an unrelated event Thomas Barnett, Assistant AG for the Antitrust division of the DOJ, who was skeptical of the Google deal, resigned the day following Google’s decision to abandon the Yahoo! deal. What’s the message here?

What’s Going to Happen Now?

All indications are that Yahoo! has to do something for economical survival and maybe a new deal with Microsoft will be more appealing since the deal with Google ended. Google is the 800 pound gorilla in the search/ad business and everything it does to expand will continue to anticompetitive scrutiny, not unlike virtually every move that Microsoft makes leaves it subject to court scrutiny. However a deal between Microsoft and Yahoo! is anything but a sure thing since the DOJ will want to scrutinize any proposal that may be anticompetitive. As a matter of fact, a DC District Judge still gets reports about Microsoft’s compliance with the 2001 Antitrust Settlement.

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