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Yahoo announced that Google has decided to terminate its advertising partnership with Yahoo, “following indication from the Department of Justice that it would seek to block it, despite Yahoo!’s proposed revisions to address the DOJ’s concerns,” the Yahoo press release stated.

While I understand Google does not want to add another legal battle, does this mark a pull back on the part of Google from their previous aggressive acquisition and partnership agenda?

The press release went on to state:

While the implementation of the services agreement with Google would have enabled Yahoo! to accelerate its investments in its top business priorities through an infusion of additional operating cash flow, this deal was incremental to Yahoo!’s product roadmap and does not change Yahoo!’s commitment to innovation and growth in search. The fundamental building blocks of a stronger Yahoo! in both sponsored and algorithmic search were put in place independent of the agreement.

Hopefully this will not further impact Yahoo or Google’s stock prices. Yahoo had announced a possible partnership/merger with AOL earlier this week but the loss of the Google partnership may now jeopardize that as well.

Barron’s Eric Savitz reported this could lead to another Microsoft offer - though one lowered to $20 a share - which I doubt Yahoo would entertain.

If you’re not familiar, CafePress is a site where you can purchase custom-designed apparel and gifts. There are many merchants selling their designs as well. Today, CafePress unveiled its new design, and it looks great.

But searching for a design you like can be a chore. That’s why I think CafePress should adopt an online ratings system to help the best designs be showcased first in their search results.

Yes, this can be abused, but it can also create a community, something that is currently only found in the CafePress forums.

CafePress competitor, Zazzle, which has experienced explosive growth in the past year despite higher prices and fewer products. What they do have is a 5 star rating system as well as the opportunity to leave comments on products. I think this helps customers better find what they’re looking for. If I had to take a guess, a customer would rather pay $5 for better design at Zazzle than a mediocre design at CafePress.

Don’t get me wrong, there are quality designs at CafePress, but finding them organically, like I said, is a chore.

Hopefully the next design update CafePress unveils is a techie-one that improves search.

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It turns out that the concern over the Google/Yahoo search advertising partnership is bipartisan. Earlier this month, Senator Herb Kohl (D-Wisc) urged caution in a letter to Assistant Attorney General Thomas Barnett.

Now, Rep. Joe Barton (R-TX) has written a letter to Barnett expressing his concern. Barton’s beef is with what he feels is Yahoo’s inadequate response to questions regarding the deal.

Barton represents a district that includes Fort Worth as well as suburbs of Dallas. The area is home to many search advertisers. It’s no surprise that Barton is raising concern on their behalf.

Google and Yahoo have tried to assure both the DOJ and advertisers that prices will not go up as a result of the deal, but fears remain. Both companies have said that advertisers set the pricing through the bidding process, but when you’re thinking about bidding for a term on the top 2 search engines, it’s understandable to think that prices will go up - even if Google and Yahoo do not set them higher.

What remains is uncertainty, which is not exactly comforting in a volatile economy.

Despite Yahoo’s decline in the search market as of late, some are beginning to cry foul, saying Wall Street is punishing YHOO just a little too much. Prices dipped below $11 a share this week, almost half the value when Microsoft made its acquisition offer for $31 per share.

A couple of points in defense of Yahoo:

1. Its decline in search market share is slight. They’re still #2. They’re comparable to the Apple of the search world if you’re just looking at the numbers.
2. The stock is being brought down by the greater market. Even Google’s stock is down to the mid-300s, despite beginning the year in the high 500s. But Google posted an increase in revenue and beat the pessimistic Street yesterday. Their stock is on the rise at this hour, while the Dow Jones is on the decline again.
3. They have a bunch of strong properties, including Yahoo Sports, which had a stellar August thanks to the Olympics. They’re also number 1 in email.

A couple of points in defense of Wall Street:

1. Jerry Yang is no Steve Jobs (or at least not anymore).
2. The search advertising partnership with Google has been delayed while they attempt to work things out with a wary DOJ.
3. The economy has everyone holding their wallets tight.

Jerry Yang and the gang need to refocus on the customer instead of executive bonuses, while Wall Street needs to understand that while advertising in general may decline, search advertising is an attractive option for advertisers looking to maximize budgets.

Oh, and in case you’re wondering, Microsoft remains a scorned lover.

Google CEO Eric Schmidt must love controversy. In a speech to magazine executives Wednesday he called the internet “a cesspool”, AdAge reported.

I don’t know if that makes Google a sewerage company, but I think Schmidt should realize that many look at Google as their filter to the web. Employees like Matt Cutts spend all their time working on ‘purifying’ the results, to expect publishers to be the answer may not be the right approach.

Criticizing opponents to the Yahoo-Google ad deal may not be a smart move given the recent drop in value of the once “golden child” of the web. Schmidt challenged “if you are going to criticize us, criticize us properly.” Claiming ad prices would not increase under the Google Yahoo ad deal.

Schmidt displayed a certain amount of callous aloofness when he avoided questions about how publishers could improve their ranking with Google.

“”We don’t actually want you to be successful,” he said. The company’s algorithms are trying to find the most relevant search results, after all, not the sites that best game the system. “The fundamental way to increase your rank is to increase your relevance,” he added” AdAge reported.

If you call the web a cesspool but do not offer insights to quality content providers who pay money to provide professional journalism I don’t think you are serious about cleaning it up, so much as taunting an economically challenged industry.

Should you delete or pause under-performing keywords - or simply adjust their bid prices? In today’s search advertising column, “Judging PPC Performance: Focus on Conversions, Part 2,” David Szetela notes that the answer will vary by advertiser, but one thing is constant: decisions about keyword and ad performance should mainly depend on conversion performance.

» Full story

Yahoo President Sue Decker took to the Yahoo Anecdotal blog to defend the search advertising deal her company struck with Google a few months ago.

Google has been doing the heavy lifting when it comes to defending the deal to the critics. So, it was about time we heard from Yahoo again on the deal.

But Decker started off with a sarcastic tone. Her first paragraph ended with:

Since the critics clearly don’t understand the deal and what it means for Yahoo!, Google, advertisers, and users, it’s time for some myth-busting.

Sue, if you want to win friends to your side, you shouldn’t alienate these critics. Many of them are AdWords customers!

But Decker devolves even further by saying making her two points about what the deal does for Yahoo instead of making it about the customer:

• Yahoo! will use this agreement to help us become a stronger competitor in all aspects of online advertising; and
• Yahoo! is not exiting the sponsored search business. We plan to remain a strong player in sponsored search.

I know that Decker has probably been consumed with trying to save a flailing Yahoo. But the fact that she’s going after this argument by defending the business aspirations of Yahoo might show why this company is struggling in the first place.

Companies succeed when they focus on the customer. But Yahoo is focused on stock prices and board preservation. This is not the way to win the hearts of search advertisers or investors.

Otherwise, Decker made points that Google has made. She says there will not be price setting between Yahoo and Google because advertisers set the prices through the bidding process. The price is related to the value which is based on demand.

Decker even played on Google’s unofficial motto “Do no evil” by saying the partnership would be implemented through respect for the Hippocratic Oath “first, do no harm.”

To be fair, Yahoo probably needs this deal in order to bring in some extra income. What they need to do what that income is invest in innovation that brings a better search experience to users. That’s what the search industry needs right now. And it’s the only way to truly compete with Google.

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In Google’s quest to make sure its search advertising deal with Yahoo goes through, it has added yet another defense to its arsenal: a new facts site. If it sounds political, that’s because it is. The Department of Justice opened an official investigation into the deal months ago. It turns out that when the largest search engine teams up with the second largest search engine to combine advertising, it raises antitrust issues!

On the homepage, Google doesn’t waste any time getting to the three major talking points it touts in support of the deal:

• This is a non-exclusive deal that will strengthen Yahoo!.
• Ad prices will continue to be set by competitive auction.
• The deal is win-win for consumers, advertisers and publishers: more and better ads.

On the right hand side is a link to an in-the-tank New York Times article that drinks extremely potent Kool-aid by practically copying and pasting a previous Google blog post supporting the deal.

Underneath that are quotes from rather large advertisers who also support the deal.

But those who have the most to lose from the deal are small businesses and web entrepreneurs who, rightly or wrongly, have built their success on Google. They fear a sharp increase in prices once the deal goes through.

Google assures that hardly anything will change, save for Adsense ads showing up on Yahoo. They also point to their relationship with Ask.com as proof that the marketplace will remain competitive.

But Ask, despite its slight growth, is not Yahoo. And when it comes to politicking, people have been burned far too often by broken promises. Plus, websites have also been burned by changing algorithms and vague policies.

Right now, in the midst of a significant economic prices, people are looking for stability. And they’re not finding it in huge companies with enormous, quick growth. The housing market is certainly different from the search market, but with sensitive emotions running high, Google just seems insensitive right now, another characteristic of companies “too big to fail.”

I don’t know what they hope is the outcome of this site. Do they hope for a groundswell of support and grassroots letter writing campaigns on their behalf? I just don’t see that happening.

Google needs to continue its lobbying and legal advocacy with the Department of Justice. But unless Google wants to suddenly become more transparent on their algorithms and site penalties, then they should just leave the little guy alone in this effort.

As October approaches, and Google prepares to implement its advertising deal with Yahoo, more and more commentary is flowing about the pros and cons of the deal.

The New York Times is saying there’s nothing to worry about. But their argument is mostly full of talking points released by Google itself last week. (Their talking points were not bad, mind you.)

Meanwhile, TechCrunch is so afraid of the deal, I’m thinking the makers of Xanax must be making a huge profit off of their anxiety alone.

Fears of price-setting do seem to be misunderstood, and the timing might only fuel those fears. Advertisers are flocking to the web in large numbers. In an unstable economy, they do so even more because search advertising is still a great deal over some traditional forms of advertising. With demand and competition higher, prices could increase. So the timing of this deal may affect how people view the prices, even though those traditional forms of advertising are a form of competition.

Still, people want competition in search.

Personally, when it comes to monopolies, I think of Microsoft (not for their search, of course). They’ve had so much of the operating system market for a long time. But in recent years, Apple has come along to snag some of that market share away.

This had nothing to do with regulation, but instead innovation. That innovation is based on how people want to work and what they want to do with their computers. There are other operating systems, but there are reasons why they don’t appeal to the masses. It’s the same in the search industry.

There’s a reason Google has so much of the market share. It’s because their search and Adwords program are what people want. In the future, I suspect the tides will shift. After all, how many times do you really find what you’re looking for on the first search? And how many times have we heard complaints about Adwords?

But no one else has anything better - at the moment. However, perhaps letting Google dominate will be the very thing that drives innovation.

There’s enough to dislike about Google to desire something better. And some genius, perhaps in a dorm room or working passionately late nights on a project after work, will come up with it.

But preventing a Google-Yahoo deal won’t make that happen any sooner. Regulation in this matter will not spur innovation. Regulation will not keep prices down. Google already has too much of a market share, and hardly anyone views Yahoo as a real competitor anyway.

Oddly enough, if Yahoo were to ever become a stronger competitor, it could result largely from the increase in income generated by this deal. More revenue would provide more money to fund research into search. This, of course, can only be facilitated by a good business model and the right focus at Yahoo. And for this, we can only hope that Carl Icahn continues to give Yahoo a much needed kick in the butt.

Google is none-too-thrilled about a SearchIgnite study suggesting that search advertising prices would increase by 22%. Now they’re fighting back by saying the study was misleading. Here are their main points:

• Ad prices are not set by Yahoo! or Google, but by advertisers themselves
• Yahoo! won’t be able to see the current auction prices for Google ads, just as Google won’t be able to see Yahoo’s prices
• The report mistakenly assumes that Yahoo! will serve Google ads for as many of its search queries as possible. This contradicts Yahoo’s own statements that their plan is to serve Google ads on search results pages where they have few relevant ads to serve.
• The report includes a misplaced focus on cost per click (CPCs) rather than the more important measure for advertisers — return on investment of their advertising dollar.
• the study fails to take into account that fact that Yahoo! shows significantly more ads per page than Google

I’m sure the analysts will be split on whether they agree with Google or not.

But one thing Google is getting wrong is the timing. This week’s fast collapse of companies in the financial market and the mortgage problems that have plagued the U.S. for a year now are only reminders of the great risks associated with companies becoming TOO BIG.

Of course, forging an ad deal with Yahoo is not the same as taking on irresponsible loans, but consumers, Wall Street, and the feds are undoubtedly wary of big promises made by big corporations. And Google has become just that in a short 10 year time frame.

Even without the current mess, antitrust concerns abound. And while Google may have permeated our culture, for some the side effects of such power have been extremely costly.

In a week after a devastating hurricane and financials falling left and right, Google is not exactly demonstrating sensitivity to the current consumer and regulatory climate by supporting their desire to expand their overwhelming majority market share even further.