One of the biggest unknowns stalking the Yahoo-Microsoft deal: What will Google do? Microsoft effectively ended Google's attempt to do a Yahoo deal last fall. Should Google return the favor? In a word, no. Given the history, it will take some extreme discipline for the search giant to resist the urge to meddle with its Redmond rival. But it should resist, because Google needs this deal, almost as much as Microsoft and Yahoo do.
Why? Because for the first time, Google is finding itself in the regulatory crosshairs, and that doesn't feel good. Just ask Microsoft. Google's share of search queries in the U.S. is about 65%, but in Europe, it's much higher: close to 80% in Germany, the U.K and France, not to mention well over 90% in fast-growing markets such as India and Brazil. That looks a lot like market domination, even though Google argued in its bid to do a deal with Yahoo last summer that search isn't, in and of itself, a discrete market.
Every bit of Google's market share is deserved, but those gaudy percentages invite regulatory scrutiny which will only strengthen if Google goes nuclear in its bid to stop Microsoft and Yahoo. Already the FTC is investigating CEO Eric Schmidt's membership on Apple's board, which he quit last week. And the last thing Google needs is increased scrutiny in its efforts to scan books and its stewardship of the reams of personal data reaped from web searches, e-mail text and ad targeting.
What's more, Google doesn't need to stop Microsoft and Yahoo to continue to win. Indeed, there's no proof that Bing -- or anyone else -- can dent Google's search share, especially if it stays focused on innovating. The bigger likelihood is that Bing consolidates the leftovers. Moreover, Google needs to listen to brand advertisers, who overwhelming want a stronger No. 2 player in search, and with good reason.
As we see it, Google has three options: fight the deal overtly; fight it quietly and hope to make sure it gets the full Department of Justice review; or just sit back and enjoy the fact that the feds are no longer focused on its own Yahoo or DoubleClick deal.
Unlike a few years ago, Google now has the savvy, the battle scars and hard-earned experience to know just how to make life tough for Microsoft, and it's studying the deal and its implications to come up with a strategy. This could be a huge opportunity for Google, if only it knows how to seize it.