Google-Yahoo offer to cut their deal in half -- DOJ knows you can't unscamble eggs

Google and Yahoo have agreed to cut back their initial proposed agreement from 10 years to 2 and to a revenue cap of 25% of Yahoo's search business -- per WSJ reports -- in an effort to salvage their proposed ad partnership.  

What does this mean?

In practical terms, the agreement would go from being worth ~$800m to Yahoo (or almost half of Yahoo's search business) to ~$400m to Yahoo (or no more than one quarter of Yahoo's $1.6b annual search  business.)

Bottom line:

The DOJ is unlikely to agree to this new offer because:

• This agreement would still make #2 search competitor Yahoo unacceptably dependent on #1 search competitor Google for its growth, profits and valuation. 
  • The agreement would still make Yahoo more interested in cooperating with its single biggest business relationship, Google, rather than competing with them.

Lastly, the DOJ understands, if they let even a cut back agreement go forward, it would be extremely difficult for the DOJ to ever "unscramble the eggs that this agreement would scamble" if the agreement proved problematic for competition in the future.

• As a general rule the DOJ does not like to get into arrangements that they can't get out of if they need to.
• It's just common sense.