Panama sits out Yahoo-Google dance

Does partnership signal end of proprietary platform?

Search media buyers are wary of Yahoo's newly announced partnership with Google. Many are wondering if the deal threatens future competition in the space and whether it spells the beginning of the end of Panama, Yahoo's proprietary search platform.

Last week, Yahoo officially turned its back on Microsoft and announced a complex partnership with Google that has Yahoo running ads delivered by Google in conjunction with select search queries on pages of its choosing alongside its own search ads.

The company said it initially will use Google ads only to better monetize less common, "long tail" search terms and that the deal allows it to maintain the ability to package both search and display ads.

But many observers saw the company simply performing a delicate dance for regulators who likely would be suspicious of a deeper partnership. The deal already is being delayed to allow the Department of Justice to conduct a review, fear being that opening the door to Google might lead it to take over Yahoo's search business and erode competition.

"The fact is, Google is significantly better at monetizing search ads, and everybody knows it," said Peter Hershberg, managing partner at Reprise Media. "Ultimately, what's going to happen is Google's ads are going to be of higher value."

That could lead to a "downward spiral for Panama," 360i CEO Bryan Wiener said, as "the rest of Yahoo's searches will become less valuable." Worst case scenario: Yahoo could find itself in AOL or territory, where "it's not worth the effort from some advertisers' perspective," Hershberg said.

Yahoo president Sue Decker addressed these concerns during a recent call with reporters. The deal, she said, "can optimize the best of both Google and Yahoo in a way that we think will attract and enhance advertisers."