Microsoft and Yahoo were pushed to the brink of a multibillion-dollar marriage and then to a sudden breakup this weekend by the same player.
It was Google, in the odd dual role of both unwitting matchmaker and self-interested spoiler.
Google’s phenomenal rise, after all, prodded Microsoft, the dominant technology company for more than two decades, to court Yahoo. And Google’s success also weakened Yahoo enough to give Microsoft the sense that it could buy the company at a good price.
A combined Microsoft-Yahoo would create a powerful competitor, and Google early on indicated that it would fight the merger on antitrust grounds in Washington and Brussels.
But Google played a part in killing the deal, for now at least, by acting more as friend than foe. It offered to let Yahoo use its more sophisticated search advertising technology, which by some estimates would have meant $1 billion in additional cash flow a year for Yahoo. The partnership would also bring Google more revenue.
The prospect of such a partnership emboldened Yahoo’s board to demand more money for the company and eventually caused Microsoft to rethink its strategy.
Steven A. Ballmer, Microsoft’s chief executive, cited the proposed Google partnership as the main reason for not pursuing a hostile bid and instead walking away on Saturday.
“Such an arrangement with the dominant search provider would make an acquisition of Yahoo undesirable to us,” he wrote Jerry Yang, Yahoo’s chief executive, in a letter, and cited five specific reasons Google would be bad for Yahoo.
Yahoo may well pursue the partnerships with Google, its main rival, to bolster its depressed stock price. Yahoo shares dropped 15 percent, or $4.30 Monday, to $24.37. The two companies refused to comment.
Not surprisingly, analysts are saying the Microsoft-Yahoo story has one clear winner: Google. And its stock price reflected that thinking Monday. More than $4 billion was added to Google’s value as the stock price rose 2.34 percent.
Not yet 10 years old, Google has emerged as a powerhouse that is wielding tremendous power in the world of technology and beyond. It was able to influence a government auction of broadcast spectrum. It nudged several cellphone companies into opening up their networks to the phones of rivals.
Its influence is all the more surprising, because its economic power is still derived largely from a single, seemingly prosaic business: the ability to place interesting text advertisements in front of people when they do searches. Advertisers pay for those ads — sometimes $1 or less — only when users click on them. In a sense, Google has built a highly profitable $16.6 billion empire a dollar at a time.
“They are the company that is going to have more influence and more control over the structure of the world information industry than any other,” said David B. Yoffie, a professor at the Harvard Business School. “The right way to think about Google is they are the next Microsoft.”
The mission set by Google’s two founders, Larry Page and Sergey Brin, to organize all the world’s information and make it universally accessible and useful is every bit as ambitious as Microsoft’s goal, in the early 1980s, to put a PC on every desk and in every home, said Tim O’Reilly, chief executive of O’Reilly Media.
“Microsoft succeeded,” said Mr. O’Reilly, producer of the Web 2.0 Summit, a high-profile industry conference. “Now Google has an incredibly audacious goal. Great companies do come from big ideas and people who are willing to go after really big ideas.”
It is the combination of Google’s economic power and its unbounded ambition that strikes fear in industry leaders in the world of technology, and beyond, in advertising, media and telecommunications. In part that is because Google wields power more subtly, and perhaps more effectively, than other big companies ever have.
For instance, this year Google rattled some of the biggest players in the telecommunications industry. The company played an important role in persuading the Federal Communications Commission to impose “open access” conditions on an auction for a portion of the nation’s airwaves. The conditions require that any network using those airwaves allow any phone and any software to run on it. Such a rule breaks the established business model of the cellphone industry, where carriers have significant control over what phones their customers can use.
Google backed its lobbying for the conditions with the promise to bid at least $4.6 billion, the minimum price set by regulators for the spectrum. Google then bid that amount, not with the intention of winning, but simply to force the open-access conditions. Verizon Wireless ultimately won rights to the spectrum.
“They just wanted to saddle a potential competitor with those obligations,” said Scott Cleland, a telecommunications analyst and frequent Google critic.
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