The two companies conducted a two-week experiment to make sure that was indeed true and both companies have called the test a success.
No deal has been announced yet, and the reasons the companies have not come to terms are unknown. But a person with knowledge of the discussions said Google has been thinking about a conundrum: deal or no deal, the company could end up with something of a public relations black eye.
If the companies reach a deal, Google is certain to face antitrust scrutiny. Eric Schmidt, Google’s chief executive, said Thursday that he was confident that the companies could structure an agreement in a way to avoid it being blocked by regulators. That may be true. But it doesn’t take a public relations expert to realize that coming under scrutiny as a powerful monopoly, whether or not it ultimately leads to a deal being blocked, is not good for a company’s image.
If Google, on the other hand, pulls away from the deal, it could face some criticism too. Google’s co-founder Sergey Brin said Thursday that Google’s offer of a search ad deal to Yahoo was not an effort to scuttle Microsoft’s takeover attempt, but rather an attempt to give Yahoo options in the face of a hostile takeover attempt. The possibility of a search deal emboldened Yahoo’s board to hold out for a higher price. Rather than fight, Microsoft decided to walk away.
But if Google walks away, essentially cutting off the lifeline it had offered Yahoo, it won’t be seen as playing nice.
Spokespeople for Google and Yahoo declined to comment.
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