Hacking Startups

Jun 13 2008

Yahoo-Google search deal is ugly news for startups

Google targets AdSense revenue sharing so that publisher gets a bit more than the next best option, which is usually Yahoo.

Yahoo running Google ads puts Google even closer to monopoly in contextual ads, reducing the revenues of all AdSense publishers.

Consumer startups struggling for a better model often rely on AdSense for revenue.

The alternative to the Google deal for Yahoo was, of course, accepting the Microsoft offer.  Had they done so, these parties would be better off:

  1. Publishers: with better AdSense alternative, AdSense would pay more
  2. Consumer startups in the same ecosystem as startups publishing AdSense
  3. Advertisers
  4. Yahoo shareholders
  5. Yahoo employees and middle management

While these parties would be worse off:

  1. Google (getting a real competitor)
  2. Microsoft (likely paying too much)
  3. Jerry Yang

How can a public company CEO act in self-interest so obviously?

The silver lining for startups is the preservation of Yahoo as a possible acquirer.  Yahoo shareholders don’t get a silver lining.