The untold story of the Google-Yahoo ad partnership is the exceptional closeness of the founders/leaders of Google and Yahoo -- and whether that exceptional closeness undercuts the credibility of Yahoo's assurances that Yahoo will compete with Google as vigorously after the agreement as before.
Consider how the leading authors who have written books about Google, describe the relationship between the founders of Yahoo and Google.
First, as background, Yahoo founders, Jerry Yang and David Filo, and Google's founders Larry Page and Sergey Brin were all computer science PHDs at Stanford University a few years apart in the 1990's.
- "It was Yahoo co-founder and Stanford alumnus David Filo who advised the pair (Google's Page & Brin) otherwise; he told them they should go ahead and enter the search engine business, which would serve as the best way for them to continue to develop their technology and improve their chance of being able to license it in the future."
- p.50, "Planet Google," by Randall Stross.
Second, as background, Michael Moritz, of Sequoia Capital, was one of the two original venture capital backers of Google, funding $12.5m of the orginal $25m in venture funding in Google.
- "Moritz had first met Brin and Page through Yahoo's David Filo back when they were still students at Stanford."
- p.63, "The Google Story," by David A. Vise.
Third, in addition to taking advice from Yahoo's co-founder to start a business, and introducing them to one of Google's original venture capital investors, Google also followed the Yahoo founders' lead on how to structure their roles as founders in the company.
- Yahoo's first CEO, Tim Koogle, "ran the business. Yang focused on product, and Filo tended to the company's ever-growing technology infrastructure. Again, if this sounds familiar, it's because it's pretty much the exact same route Google would take a few years later."
- p.62, "The Search," by John Battelle.
Fourth, in addition to knowing that Google followed Filo's advice in: how to start the business, who to get funding from, and how to structure the management of their firm, it is important to know the leadership/follower differences between the leaders of Yahoo and Google.
The very different personalities of the Yahoo and Google founders suggest that Yahoo's co-founders are likely to feel comfortable with a more deferential 'follower' role with Google -- rather than the expected vigorous competitor role with Google.
- Consider this telling comparison of Yahoo's and Google's founders by John Battelle in his book "The Search" pages 235-236:
- "But Yahoo is not Google, and the differences between them are illuminating. Consider the founders. While both sets of founders remain at their respective companies in important roles, Jerry Yang and David Filo, founders of Yahoo, are self-effacing, deflective of credit, and quick to delegate authority and responsibility to others. "Jerry is probably the most decent guy you will meet in the Valley," says friend and investor David Siminoff, a well-known Valley financier (and admitted Yahoo partisan). "They let Terry [Semel, the CEO of Yahoo] run the company. But the Google guys, well, they rule with an iron mouse over there."
- Siminoff's comments were reinforced by scores of senior Valley folk I interviewed during the course of reporting this book. When you walk the halls at Google it's clear that Brin and Page are the bosses. Over at Yahoo, on the other hand, Filo and Yang are the founders, and therein lies the difference."
Bottom line:
The normal presumption in antitrust is that dominant market players, or competitors in highly concentrated industries, have substantial economic incentives to anti-competitively collude to divide the market, restrict choice or raise prices.
The exceptionally close relationship between the leaders of Google and Yahoo, and their very different leadership styles, raise additional doubts about whether Yahoo's statements are credible that Yahoo will continue to compete as vigorously after the ad partnership as before.
- Is this ad partnership 'competition'?
- Or is this ad partnership a pact among close friends?
The core question for DOJ and the State AGs is who deserves the benefit of the doubt here?
- Customers at risk?
- Or Google-Yahoo?
