Friday, March 09, 2007

Yahoo-AT&T: an alliance under pressure

Nothing cures end of the week writer's block better than a front page Wall Street Journal article on one of my favorite subjects: alliances. Today's article about the shifts underway in the Yahoo-AT&T partnership contains lessons for any company in an alliance or contemplating one.

AT&T is seeking to renegotiate the terms of the alliance, under which it pays Yahoo a revenue share for each DSL customer it signs up via Yahoo, and funnels traffic to Yahoo services through its home page. Simply put, the world has changed since the original deal was signed in 2001, and so has the power dynamic in the alliance.

AT&T has made two gigantic acquisitions and now is a behemoth with 12 million broadband customers and a strong nationwide brand. Yahoo has fallen to number two in internet search and advertising to Google. Add the fact that Google is paying people for placement on computer screens and home pages, and Yahoo will have to take a serious haircut as the alliance is recast.

The lesson for those striking alliances--monitor changes in the landscape and be prepared to make adjustments (or have them thrust upon you) as your business and your partner's change. No good thing lasts forever.

(Update: in a tantalizing blog post, the Journal speculates that the endgame of this alliance could result in AT&T acquiring Yahoo.)

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