All Things Digital

As someone who has been a longtime critic of Microsoft’s (MSFT) historically thuggish tendencies, BoomTown finds it a little hard to believe that Yahoo (YHOO) and Google (GOOG) think that they can get away with any kind of significant search-ad outsourcing deal that would move the needle at Yahoo and, I guess, pressgang the software giant into making a higher bid in its quest to acquire it.

But, as reported in The Wall Street Journal today, the pair are serious about an outsourcing deal in which Google would take over its search-ad business, since Google is able to monetize that traffic with such superiority to Yahoo’s efforts.

Sources at Yahoo tell me that the tests the pair has been conducting recently went much better than expected, with Google’s ad search engine turbocharging Yahoo’s traffic dramatically.

Hello. Of course it did.

In fact, such a deal if struck would add more than $1 billion a year to Yahoo’s cash flow, said the Journal report, which would presumably give Yahoo the argument it needs to prove it is worth more than the $31-per-share unsolicited offer from Microsoft.

Setting aside the point that if this was such a great idea, why didn’t Yahoo do this six months ago (its execs considered and reconsidered it, many sources have told me, but dithered about doing it until this crisis hit), concerning critical issues related to Google’s domination of the important online search arena, The Journal noted:

“The overlap between Google and Yahoo could make it hard to get a deal past regulators, analysts say. But the two are exploring ways to address potential regulatory problems, people familiar with their discussions say. Possibilities include limiting the partnership to specific groups of search queries or regions, for example.”

Specific groups of search queries? Of regions? What is that exactly?

Yahoo’s Sri Lankan users can only ask about cupcake recipes? Or perhaps Yahoo can answer the query, “What is love?,” while Google lets us know who wrote the book of it.

To my mind, this is an example of juvenile game-playing that has seemed to have plagued this deal, which ignores Yahoo shareholders by upping the risk of value destruction significantly.

Although it is good to see such activity and ideas coming out of Yahoo with such force finally, it seems too much, too late.

And while it might be a long-cherished dream of Google’s to take over Yahoo search–and also get the chance to return to the scene of the crime, since Google got its first big push from doing Yahoo search, before Yahoo wised up too late–there is simply no way this will be allowed by regulators nor should it.

Still, you have to almost admire the chutzpah of the search giant in making this move, if the sheer and unadulterated arrogance of it wasn’t so distracting.

Because, while Google has almost none of the obvious menacing aggression that characterized Microsoft when it thoroughly dominated tech (although all those beach bikes on its campus inexplicably creep me out a little bit), the company still cannot be allowed to have a monopolistic share of the market.

It is bad for advertisers, it is bad for consumers, it is bad for innovation, no matter how well-intentioned Google is.

And no matter how many flashy moves Google and Yahoo make, it is flat-out wrong for one player to so dominate such an important sector (and I hope regulators look at the email domination in the case of a Yahoo-Microsoft union with a similar gimlet eye).

As I noted in a post last week about Yahoo and Google doing a search outsourcing deal:

So, any further hook-up between the two seems sure to become the Justice Department Lawyer Employment Act of 2008, the likes of which we have not seen since Microsoft got its turn at being deservedly whacked for being a monopolist back in the last century.

Let’s face it, outside of those who cannot seem to shake the annoying Kumbaya mentality over at Google, a Yahoo-Google partnership is simply fantastical, like some out-of-control Dr. Seuss ditty.

They could not, would not with a goat. They would not, could not on a boat. They will not share an algorithm, they will not, will not, Jerry-I-Am.“

Please see this disclosure related to me and Google.