The Senate Subcommittee on Anti-Trust heard testimony Tuesday regarding the recent Google/Yahoo ad sharing deal. Committee Chair Herb Kohl (D-WI) opened the hearing by expressing his concerns about an agreement between two companies that control 90 percent of the on-line search market. Kohl said he worried the deal would reduce Yahoo to “nothing more than the latest satellite in Google’s orbit.” He also noted that Microsoft was very capable of testifying about competitiveness issues “from experience”, having nearly eliminated its own competition in the 90’s.
The players lined up as expected, with Google and Yahoo denying the deal would hurt the market and claiming the added revenues would help Yahoo become even more aggressive in its competition with Google. Microsoft took the opportunity to express and highlight its concerns — while also establishing its own case in any future anti-trust hearings should the Redmond giant ultimately acquire Yahoo.
Microsoft General Counsel Brad Smith stunned the gallery when he announced that he had heard Yahoo CEO Jerry Yang state that a Google/Yahoo deal would severely hurt Microsoft’s efforts in the search space.
Ultimately, these hearings could signal a turning point for the search industry. The days of a governmental hands-off approach to this emerging market appear over . . . and now, like Microsoft and Intel in the 1990’s, Google’s primary business challenge may be not staying one step ahead of the competition, but rather one step ahead of the Justice Department and the FTC. Intel navigated these troubled waters with skill. Microsoft took a more combative approach, a position that isn’t forgotten on Capital Hill and one that the company still pays for in perception. Time will tell which path Eric Schmidt chooses to follow.