Yahoogle Countdown–Will It Blow Up, Get Neutered, Go Judge Judy or Move Forward?

MySpace Countdown Clocks

The election is not the only event with only days to go–a move in face-off Yahoo and Google are in with the Justice Department over their controversial search advertising partnership will have an outcome, sources close to all sides said, before the next President is chosen.

Thus, I predict news either tomorrow or Monday.

Why? Well, campaign news will surely drown out any attention any development might get, of course.

But, actually, for more obvious reasons: Whoever is elected, the Assistant Attorney General for Antitrust, Thomas Barnett, will be leaving that post sometime after the Nov. 4 election.

Thus, Barnett and his team are likely–after all this noise–to want to take action of some sort before he becomes, in essence, a lame duck.

Of course, it is ironic that, as the clock counts down the last minutes, a regulator not regarded as a very effective trustbuster and who has taken a mostly hands-off attitude toward meddling with businesses, could launch a lawsuit against the most powerful Internet company in the world.

Or not.

Yahoo (YHOO), Google (GOOG) and the Justice Department are still talking, sources said, trying to come to some accommodation.

So, as we wait for the verdict, here’s a short handicap of options:

1. Google and/or Yahoo walk:

It seems far more likely that Google would do this than Yahoo, given its corporate culture is impatient with moving forward illogically (think Spock and you have the right picture of Google’s mindset).

I would imagine Google execs do not want to accept any caps or changes to the deal at all, and might conclude such restrictions make it not as worthwhile.

Yahoo, of course, cannot walk as easily, depending on the deal for revenue and because it must avoid having to then turn to Microsoft (MSFT) to strike a search ad deal from a very prone position.

Thus, Yahoo has to be pulling out all the stops to make something work.

Then again, if a Justice Department lawsuit is the alternative, walking would be the best option.

Prediction: Even odds.

2. Google and Yahoo accept changes:

Whether it be caps or monitoring or forcing Yahoo to strike a similar deal with Microsoft, this option seems like a bad one for the pair, as it hobbles the deal before it even has a chance to be tested.

Plus, the joy of government regulators breathing down your neck 24/7 is, well, priceless, especially after Google CEO Eric Schmidt told regulators he would move forward with or without them.

While Google has now perhaps permanently put the government on notice that is must be more scrutinized than ever going forward with that unfortunate statement, I would be surprised if Google accepted any substantial changes to the deal.

Prediction: If small adjustments, likely. If more, it would be hard to imagine.

3. The Justice Department files a lawsuit:

Ouch. Bad all around.

First, the Justice Department will have a hard time proving this partnership–which has not launched–is damaging. While it is good to have all those nervous advertisers to point to, it will be an uphill slog of a case.

Second, another lawsuit or fight for slap-happy Google? Oh, dear. It just settled the book scanning lawsuit and is still embroiled in a bigger lawsuit with Viacom (VIA) over YouTube copyright infringement. Enough.

Third, a Justice Department lawsuit for Yahoo should be the proverbial straw that breaks Yahoo CEO Jerry Yang’s rule of the company and would get Yahoo stock to the penny-stock level.

Prediction: I witnessed the Microsoft antitrust trial, while working at the Washington Post and I am here to say to all parties involved: Do not go there.

4. Justice waves the deal on through as is:

Wake up, Eric and Jerry, you’ve been dreaming! Also, in this event, the head of Microsoft CEO Steve Ballmer would explode.

Prediction: Well, it could happen. Also Ralph Nader could get elected.

Please see this disclosure related to me and Google.