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Selling the suckers on Google-Yahoo

Uncle Sam's piled up a lousy economic track record. And now Congress is being asked to remain mum on Google-Yahoo? Don't bet on it.

While the food fight between Yahoo and Carl Icahn escalates--and while I'm at it, don't forget Microsoft--both the House and Senate Judiciary committees are getting ready to hold hearings on the proposed Yahoo-Google tie-up. In advance of this primo photo op for the hired help, I had a chance to review the prepared testimony of David Drummond, Google's chief legal officer. Give the guy credit for putting together a crisp presentation. Among the highlights:

• If Uncle Sam green-lights this deal, Google won't wind up taking nearly total control of the search market.

• The deal is good for users and advertisers.

• Google is not going to wind up with more search traffic.

It's hard to say all that and keep a straight face, but Drummond's a good lawyer and I'm sure he'll give a convincing presentation. Drummond knows he better bring his A game because he's going up against far sharper minds than the grandstanders who turned the 2006 China-Internet hearings into a veritable circus.

Drummond's central argument will be that Yahoo remains a viable rival. That's where the debate will ensue. How is more concentration of power--i.e. even greater dependence on a single company--supposed to benefit online advertisers? Just to show humor is in no short supply, Microsoft will play that card for all its worth. The biggest software monopoly in history can rightly argue that Google accounts for about three-fourths of search advertising revenue (and roughly the same number of search queries) in the world. Add Yahoo's roughly 20 percent and that translates into POWER. Microsoft knows something about that. But I digress.

Microsoft should also hammer hard on another point: the Yahoo-Google arrangement is structured so that Yahoo earns more money when Google earns more money. Because it will share in Google's revenue, what's Yahoo's incentive for competing against its partner? Google has a briefcase full of counterarguments to offer, but it's going to be a tough sell. Especially considering the change in the political constellation of forces. After nearly eight years letting corporate America have its way, Uncle Sam has piled up a fairly lousy economic track record. And now Congress is being asked to remain mum on Google-Yahoo? Don't bet on it.

Warren Cowan, chief executive of the U.K.-based search engine company Greenlight, spammed reporters Monday with his thoughts. But consider what he has to say:

"As far as the advertisers go, I don't see this as a good thing for the online advertising industry. We speak to major advertisers every day, and what they want is better returns, more distribution and less dependency on one provider. Likewise search agencies want to be able to diversify their clients spends and reduce risk too, and this deal doesn't deliver these to anybody. Whilst a Microsoft/Yahoo deal would have reduced the number of people in the market, it would have done much more to balance the options open to advertisers."

Should be fun tomorrow.