Testing Google-Yahoo's claimed "efficiencies"

Most of Google and Yahoo's defense of their ad agreement has been to claim it creates 'efficiencies.' The problem with that defense is that most all of the claimed "efficiencies' -- are negative in nature -- not positive justifications for approval.

New Negative Network Effect:

• The essence or core activity of the proposed ad agreement is removing Yahoo search queries from the Yahoo monetization engine and running them through the Google monetization engine.  
• Less queries drains Yahoo's Panama engine of what it needs to get better and produce more "relevant" targeted advertising -- so the more queries diverted away means less and less Yahoo Panama monetization efficiency.
  • In other words, Yahoo gets paid a market-premium by Google for suffering competitive dis-economies of scale -- for the benefit of the ad partnership. 
• On the other hand the more search queries to Google increases Google's monetization efficiencies and network effects -- effectively enabling Google to efficiently and anti-competitively widen its lead over all its competitors.
  • In other words, Google trades sharing revenue with its partner Yahoo -- for economies of scale and network effects which increase Google's pricing power.    

Cartel/Monopoly revenue efficiencies:

• The core activity of shifting search queries from Yahoo to Google creates revenue 'efficiencies' -- in that it generates higher average prices from advertisers.
• While this ad partnership is clearly more revenue efficient than competition, the efficiences redound only to Google and Yahoo and not customers.
  • Thus these are classic cartel or monopoly efficiencies -- anti-competitive efficiencies -- not competitive efficiencies.

Stock Price efficiencies:

• The core purported benefit of the Google-Yahoo deal for Yahoo is faster growth and increased cash flow to increase Yahoo's stock price.
• Customers or users get little benefit from a higher Yahoo stock price.

Self-fulfilling efficiencies:

• The loud signal this deal sends to customers of Google and Yahoo is that Google is more efficient than Yahoo -- so customers should just use Google.
• As customers realize that they can't enjoy a competitive efficiency of a lower price on Yahoo and that they are sending their advertising dollars to Google regardless  -- customers will effectivley be encouraged to efficiently cut out the redundant middleman overhead of Yahoo and take their business directly to Google.
• The perception of efficiencies is the reality of efficiencies. 

Bottom line:

Google-Yahoo does in fact create efficiencies. Unfortunately they are mostly all anti-competitive cartel/monopolization efficiencies and not competition efficiencies that benefit customers.