Good vs. Evil? Yahoo, Google and AOL vs. Microsoft and News Corp.

Of course it's not that. This is business, not a morality play.

By Farhad Manjoo

Published April 10, 2008 11:36AM (EDT)

This is business, people, not a morality play, so please, refrain from any value judgments when you read this news: Yahoo is teaming up with Google and AOL in an effort to escape from Microsoft's clutches. But Microsoft is looking to Rupert Murdoch (!) for help in gobbling up Yahoo. Egads!

I know what you're thinking, you bleeding hearts -- that this is a classic good vs. evil fight. You're picturing AOL as the helpful friend to your still-on-dial-up grandmother, Yahoo as that do-good Internet pioneer who's hit on hard times, Google as the haloed innovator whose official mission is to refrain from sin.

And meanwhile, on the other side, we've got monopolistic Microsoft hooking up genocidal tyrant Rupert Murdoch, kind of like if Lex Luthor and Sauron got together for a doubles team. So hard to choose which side to root for, eh?

Well, just stop. Because it's Yahoo, actually, who's playing hardball here, Yahoo the one with tricks up its sleeves.

On Wednesday, for instance, the company announced a clever deal to allow its rival Google to run ads on Yahoo's search results pages. The effort is meant as a test -- Google's ads will only show up on some of Yahoo's search results, and only for a two-week period -- but the move could prove Yahoo's value to investors, because Google's ads fetch high profits.

If the test shows that Yahoo could earn wheelbarrows of money if it switched to another ad provider, Microsoft's bid to take its merger case to Yahoo's shareholders could backfire -- the shareholders might rightly demand a higher price than MS is now offering.

Then there's Yahoo's AOL bid. As the Wall Street Journal reports, executives are considering a deal in which AOL would invest in Yahoo, and Yahoo would use the cash to buy back some of its own stock, thereby blocking a Microsoft deal.

So how's Microsoft responding to this? Not by raising its investment above $31 per Yahoo share, at least not yet. No, instead MS wants Rupert Murdoch to invest some of his money, thereby creating a company that combines Yahoo, Microsoft's MSN, and News Corp.'s MySpace -- a bonanza for advertisers.

But as the Journal says, such a deal seems like an uphill battle: "A three-way combination would also increase the complexity of any post-deal integration in areas such as combining computer systems, streamlining management and sorting out brand strategy. It might also be hard to drum up Yahoo shareholder support for such a more complicated scenario."

Oh, and one more thing, for you good and evil bean-counters: It's Bill Gates, Microsoft's co-founder and chairman, who's out there saving the world, and it was Yahoo that helped China jail a dissident. And there's still no proof Rupert Murdoch's a genocidal tyrant. (I think.)

Farhad Manjoo

Farhad Manjoo is a Salon staff writer and the author of True Enough: Learning to Live in a Post-Fact Society.

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