Google terminates Yahoo deal after DOJ rejects revised deal

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Google has decided to terminate its ad deal with Yahoo after the US Department of Justice rejected the revised ad deal that would account for more than 90 percent or more of the web ad market, and “would likely harm competition in the markets for Internet search advertising and Internet search syndication.”

Google’s Chief Legal Officer, David Drummond, said in a blog post that while Google was disappointed, but it would not contest the decision – saying that the prospect of a lengthy legal battle would “distract us from our core mission.”

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.

We’re of course disappointed that this deal won’t be moving ahead. But we’re not going to let the prospect of a lengthy legal battle distract us from our core mission. That would be like trying to drive down the road of innovation with the parking brake on. Google’s continued success depends on staying focused on what we do best: creating useful products for our users and partners.

Yahoo has also express disappointment, but also expressed its disappointment with Google, who rejected the move to fight the deal in court. In a press release, Yahoo said:

Yahoo! continues to believe in the benefits of the agreement and is disappointed that Google has elected to withdraw from the agreement rather than defend it in court. Google notified Yahoo! of its refusal to move forward with implementation of the agreement following indication from the Department of Justice that it would seek to block it, despite Yahoo!’s proposed revisions to address the DOJ’s concerns.

However, even though this is bad news for both companies, Yahoo’s stock price has increased 4.3 percent at the time of writing, to $13.92; and Google falling 6.7 percent to $342.24. But some are speculating that Microsoft may be attempting to buy Yahoo again. Previously, Yahoo rejected a bid from Microsoft after Jerry Yang and the Board of Directors decided that they can do better. You can view both companies stock prices below.