1. Google would have had to pay a large portion of revenues to Yahoo! as TACs (traffic acquisition costs). This means more revenue to Google, yes, but no significant increase in profits… meaning that Google’s profit margins would have shrunk. Analysts don’t like that, and as Google’s growth stalls, it cannot afford that.
2. Adding Yahoo!’s 30% market share to Google’s 60% market share would have raised the ire of the feds. Yes, I know, this would not have been the same thing as if Google owned that 30%, but the fact remains, the partnership would have awoken the feds.
Quite simply: Yahoo! has been played like a fiddle. Worse off, by even doing that little test with Google, Yahoo! is now less desirable to MSFT. In MSFT’s eyes, YHOO’s search is tainted, it’s as if a groom finds out on the eve of his wedding that his wife is not quite a virgin.
Of course, I still think that MSFT has the hots for YHOO… but it will take its time, deservedly so. After all, just because a girl tells you she is not interested or plays hard to get to the point of frustrating you does not mean you stop liking her.
That’s right, MSFT hearts YHOO.
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