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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strategy, alliances, negotiation, Wall Street Journal

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Alliances: the importance of seeing the end before beginning

When negotiating a strategic alliance, few companies take the time to think about and discuss with their partners a plan for what happens when the alliance comes to an end. And they all end, sooner or later.

In an article in today's Wall Street Journal Business Insight Section, authors Ranjay Gulati, Maxim Sytch and Parth Mehrotra (link - $$) urge companies to set out the rules for disengagement with enough detail that when time comes to dissolve the alliance, most of the important questions--who retains the intellectual property, how will customers be supported, who takes ownership of tangible assets--have ready answers. Leaving these items undone, the authors argue, adds significant conflict and risk to an alliance.

From my experience, the contemplation and discussion of breakup items are the last large issues on the table before closing. The psychology of negotiations has a lot to do with it. It's hard to talk about endings when you're just getting to know each other.

But deferring the discussion till after the agreement is signed doesn't work. Then, everyone who isn't overcome by deal euphoria is working on closing business. And the shifting power dynamics of alliances make pinning down criteria post-signing a very difficult task.

So, as unpleasant as it may seem, negotiate that prenup before getting married to another company.

(Picture by rovaro via stock.xchng)

strategy, alliances, negotiation, Wall Street Journal

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