Week in review: Google axes Yahoo ad deal

Google is letting Yahoo go it alone.

Bowing to federal regulators' antitrust concerns, Google pulled the plug on a search-ad partnership with Yahoo that would have given the latter major new revenue.

"After four months of review, including discussions of various possible changes to the agreement, it's clear that government regulators and some advertisers continue to have concerns about the agreement," David Drummond, Google's chief legal officer, said in a blog post Wednesday.

The 10-year deal would have placed Google ads on some Yahoo search results, and the companies would have shared resulting revenue. The deal would have let Yahoo show ads on pages where its own technology, called Panama, wasn't able to provide results, the company said.

In some ways, the Justice Department's decision was not terribly surprising. Over the past two or three weeks, federal antitrust regulators became increasingly wary of the agreement and, in particular, tested Google's resolve to remain in the deal, according to sources. Over the past few weeks, the give-and-take of negotiations between the parties began to falter as government regulators became increasingly unyielding in their demands.

Regulators, at one point two or three weeks ago, told Google that if the government pursued a lawsuit to block the deal, it would consider adding a monopolization count against Google to the complaint, which in essence would allege the search giant of using monopoly power in a relevant market. Apparently that hit a nerve with the search giant, noted a source, and it became evident to regulators that Google's resolve to fight a legal battle was wavering when faced with the prospect of a monopolist label and all the regulatory oversight that could come with it.

Now that Google has given Yahoo the boot, is Yahoo CEO Jerry Yang getting eager to make a deal? Yang appears to be leaving the door very much open for an old suitor: Microsoft.

During a moderated "conversation" at the Web 2.0 conference in San Francisco, Yang said late Wednesday, "To this day, I have to say that the best thing for Microsoft to do is to buy Yahoo. I don't think that is a bad idea at all..."

Election fever
Intense interest in the outcome of the U.S. presidential election helped drive record traffic to news sites, according to Akamai Technologies. At 8 p.m. PST Tuesday, just as word was coming that Barack Obama had won the election, Akamai's Net Usage Index showed more than 8.5 million worldwide visitors per minute to the company's aggregate set of news sites. Not all of the traffic, of course, may have been specific to election coverage, but the relative audience size in the index correlates strongly to particular events.

Tuesday night's total was a big jump from the previous record of 7.3 million, set in June 2006, when Ghana eliminated the United States in a World Cup soccer event. Sporting events--most notably the U.S. March Madness basketball tournament--dominate Akamai's list of the top 15 events in terms of visitors per minute since the index was started in August 2005.

On Wednesday, two new Web sites launched that map out Obama's transition to the White House. Change.gov, Obama's official transition site, features a blog, a section with Obama's agenda, and a section that profiles the Obama administration. Meanwhile, the Government Accountability Office launched its own 2009 Congressional and Presidential Transition site to make recommendations for ways the new government can address the nation's biggest challenges.

When Obama becomes president in January with a strongly Democratic Congress, he'll have the chance to push a technology policy that relies more on government subsidy and regulation than that of his immediate predecessor.

On copyright, the conventional thinking is that Democrats are more likely to align themselves with the recording and movie industries' wishes. That may not be the case here: it was John McCain who talked up more aggressive enforcement of copyright law domestically, while Obama said "we need to update and reform our copyright and patent systems to promote civic discourse, innovation, and investment while ensuring that intellectual property owners are fairly treated."

Meanwhile, some of the Internet activity related to the election fell into the nuisance and nefarious categories. Within hours of the election's conclusion, spam seen worldwide began incorporating the name and image of the incoming president, according to various security vendors. The U.K.'s Sophos reported 60 percent of all spam seen by the lab on Wednesday was in some way Obama related.

One piece of spam alleges to contain a link to video of Obama's acceptance speech but links to a site with an .exe file that could infect systems with a Trojan virus.

Also, after the election, word surfaced that Obama's presidential-campaign computers had come under cyberattack this summer from an "unknown entity." His machines weren't alone; John McCain's computers were also attacked, according to a report in Newsweek.

On the airwaves
The Federal Communications Commission--despite protests from TV broadcasters, entertainers, professional sports leagues, church pastors, and some congressional leaders--approved rules for devices using spectrum that sits between broadcast TV channels. This 300MHz to 400MHz of unused spectrum known as "white spaces" is considered prime spectrum for offering wireless broadband services because it can travel long distances and penetrate walls.

Technology companies such as Google, Motorola, Microsoft, and Dell have been lobbying the FCC for years to open this spectrum for unlicensed use. The hope is that the spectrum could be used to augment existing wireless services or eventually be used to create new wireless broadband services.

But TV broadcasters and wireless microphone companies have long opposed the use of this spectrum, saying it will interfere with their services. In the past few weeks, these opponents, along with several congressional leaders, had urged the FCC to allow more public comments before the vote would take place.

The FCC also approved the $28 billion merger between Verizon Wireless and Alltel after a four-hour delay in which commissioners negotiated terms of the deal. The merger will create the largest wireless operator in the U.S. The FCC had been expected to approve the merger, but like the Justice Department, which is requiring Verizon to sell off assets in 22 states, the FCC was expected to put its own conditions on the merger.

During the meeting, the two Democratic commissioners on the FCC--Michael Copps and Jonathan Adelstein--expressed concern that combining Verizon and Alltel will limit the number of roaming partners that smaller carriers in rural markets can work with. In addition to keeping roaming rates the same, the FCC is requiring Verizon to divest service in a total of 100 markets. It is also requiring E911 accuracy and Universal Service Fund contributions.

Also of note
One of the fathers of the iPod, Tony Fadell, is leaving Apple after seven years spent inside the division that changed the company's fortunes...Circuit City announced plans to close 155 stores and lay off 17 percent of its workforce in the U.S....Microsoft is discontinuing an option to use Hotmail's older "classic" interface, merging it with a newer "full" design into a hybrid the company says is faster to use than both the predecessors...YouTube will begin offering feature films produced by at least one of the biggest Hollywood movie studios, possibly as early as next month.