In the end, few people were actually fooled — but it did allow them cover to establish dominance in Eastern Europe without drawing western powers into a fight and temporarily blunting scorn (we just need to help them rebuild their countries).

This is how I think about the Google-Yahoo deal. Google needs Yahoo to maintain the illusion of independence to head off other issues that an (even more) overt dominance would cause.

And because of the market dynamics @Niki describes, it’s in Google’s interest to act quickly to prop up Yahoo (“we’re just helping them rebuild their country, Comrad”) before they slide to oblivion.

They spend some cash in the short run, but they grow their scope of influence just the same and *might* preserve their operating freedom in the medium term.

We know there are some smart people at Google — i have to believe their approach to monopoly (regardless of Yahoo) is causing them significant strategic concern.

Just saying “But, we promise we’re not evil” is not likely to satisfy too many — especially given the way the Chrome launch went (e.g., the “we own everything you look at” EULA, sneaking Google Gears onto people’s PCs, updating PCs without notice, etc.).

With Yahoo (and the sites Yahoo represents), they would have closer to 90-95% (everyone by AdCenter really).

Also remember there is a difference between search volume and revenue. Google earns roughly 70% more than Yahoo on many queries. And you can imagine how much more they earn than MSN.

So we are already over 80% share with Google as it is.

With their negotiating position, if they simply waited a year, they’d gain another 10 percentage points of volume share and the queries would be running under the Google.com umbrella where margins are insane, versus what they have to give up to Yahoo (90 cents in the dollar).