Yahoo loses $800 million deal – Google is giving up

Bad news doesn’t seem to stop for Yahoo. Several days ago they killed Yahoo! Live, the live video streaming service.

Now today Google decided to pull the plug to Google-Yahoo advertising deal, a deal which would have brought around $800 million/year to Yahoo and would have filled partially the hungry-for-cash pocket of the old search engine and portal.

The main cause which made Google walk away seems to be that the government regulators and some advertisers still had concern about this deal and Google didn’t want to get into a legal battle, according to Google blog.

“However, after four months of review, including discussions of various possible changes to the agreement, it’s clear that government regulators and some advertisers continue to have concerns about the agreement. Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners. That wouldn’t have been in the long-term interests of Google or our users, so we have decided to end the agreement.“

Google probably didn’t forget the advertising deal with MySpace where they paid hundreds of millions/year in exchange of having Google search on the well-known social networking site. Probably they don’t want to repeat that with Yahoo (especially in this bad economic time), but this is just a assumption.

Anyway, Yahoo now has an even rougher road ahead. It has to find another cash cow or it has to improve its advertising technology to make it more competitive. If that means sacrificing Jerry Yang and the rest of the staff, then so be it.

Surprisingly, Yahoo stock went up 5% after this announcement while Google stock went down 1.4%. That won’t last long probably.

Either way, I hope Yahoo will not fade out totally and leave behind only two major Internet players: Google and Microsoft.

Good luck, Yahoo!