Doug Anmuth, who is an analyst at Barclay’s, believes that Google is re-evaluating their deal with MySpace. The current deal between the two companies requires Google to pay $900 million to MySpace over a span of three and a half years, which end only in mid 2010.

Google has not been able to reap the expected financial benefits from this deal so far and it seems very likely, given the current worldwide economic climate, that they may decide to pull out of an unsatisfactory partnership.

In fact, if one takes a closer look at some of Google’s recent financial decisions, it is quite obvious that the search giant is protecting its margins by making some not-so-subtle changes in their policy as regards distribution deals. They are being more prudent where spending money is concerned.

The past few months have seen Google let go of a potential mobile search partnership deal with Verizon Mobile to avoid competing on price and margins with Microsoft. They also did not renew their toolbar distribution deal with Dell and have allowed Microsoft to happily walk in on what was previously Google territory.

Since Google is firmly established as the search market leader, they do not really need to get distribution deals at any cost. This is probably a wise decision for now.

Microsoft, on the other hand, is trying very hard to increase market share in search operations. If Google disengages from the deal with MySpace, Microsoft might swoop in to take their place, even at a higher price than such a deal would be worth.

The audio ad service was launched in 2006 to enable the buying and selling of radio ads via Google AdWords. However, the search company now feel that in spite of investing a lot of resources, these services have not actually managed to create the kind of impact that was expected and it would be better to discontinue these services.

Google Audio Ads and AdSense for Audio will be phased out by the 31^st of May. Until then, publishers will be able to continue publishing their inventory. Google Radio Automation will be sold off to an interested party.

All is not quiet on the audio front, though. Google plans to concentrate on developing technology to deliver relevant ads for online streaming audio, where the audience numbers are increasing.

While it may be remembered that Google has also decided to shut down their Print Ads division only last month, they have stated that they will continue with their TV advertising initiatives as they can measure the audience response here and their advertisers can therefore judge ad effectiveness.

While some staff may be reassigned after the discontinuation of these services, it is expected that about 40 people will find themselves jobless as a result of this decision.

Even though Google executives maintain that they are closing the audio ads service due to failed expectations, if one looks at all their other recent cut-backs – print ads, followed closely by the closure of Jaiku, Dodgeball and Notebook – it looks suspiciously like a move to try and keep up the profit margin and tide over the financial meltdown by sticking to what they know best – search.

A few months ago, Google relocated some of their engineers from Phoenix-Arizona, to other places. Now another 70 employees from Austin-Texas, Trondheim in Norway and Lulea in Sweden are being asked to do the same. The reason behind this is to have fewer but better-coordinated engineering sites, which would help reduce overhead costs, while retaining the quality and efficiency of their services.

Another major step being taken by Google is to reduce the number of new recruits. Initially, they ended all the contracts they had with the outside sources that provided recruiting services to them. Now, however, they have gone a step further and decided to reduce the size of their recruiting department by as many as 100 people. The logic is, of course, that since they will be recruiting fewer people for quite some time, they will require less people to do so. However, the management is hopeful that most of these staff members will be reassigned to other appropriate jobs within the organisation itself.

While Google had laid off 300 employees of their subsidiary, DoubleClick, last year, the Times points out that this is the first time their own employees are being made redundant.

Google has also announced that they will discontinue some services that have not been doing too well or have been replaced by better apps. Amongst them are Jaiku, Dodgeball, Catalog Search, Google Notebook and uploads for Google Video.

Another indication of their cost cutting efforts is the fact that instead of the $1,000 bonus that employees get as a gift every year, this time they were just given a new T-Mobile G1 mobile phone.

Though these measures are relatively minor compared to the layoffs at Yahoo! and other tech companies in recent month, it is certainly bad news that the one company most experts thought would sail through the reecession unscathed is already trimming its workforce.

The worst is probably yet to come. Among other technology firms, Motorola has announced 4,000 job cuts, while there are unconfirmed rumors about the possibility of 15,000 layoffs at Microsoft.

Yahoo! reported a net loss of $24.1 million or 4 cents per share for the third quarter. Although these figures are in sync with Wall Street estimates, they represent a sharp fall from the $8.1 million or 13 cents per share profit for the same period last year, which was also the time when Yahoo! had made big promises about their new advertising platform (code-named Panama). Needless to say, Panama did not live up to any of the hype and Yahoo! is now suffering the consequences.

This glaring downhill slide has forced those at the top to consider layoffs for about a thousand out of their estimated 14,300 employees in the immediate future. However according to CEO Jerry Yang, the company will continue investing heavily in some strategic departments like paid services, and advertising and search technology. Some of the laid off employees could reapply for jobs in the growth sectors.

Analysts at Wall Street expected advertising revenue to slide down, as it did. However, they did not expect the outlook to be as bleak as was painted by Yang. Revised projections for the fourth quarter place expected revenues at only $160 – 180 million against Wall streets estimated $190.8 million. Year end estimates have also been cut from $700 – 775 million to $688 – 708 million. Investors have taken these results negatively and Yahoo! share prices fell by over 10% in after-hours trading.

Egos at Yahoo! have taken a severe beating over the past few weeks, as they should. Their demise will be of their own making. During an interview with Fox Business News yesterday, Michael Arrington of TechCrunch said, “At some point Yahoo! might have to make a decision – to either lose the ad platform or partner with Google, or lose their company and get sold off to Microsoft or to a hedge fund in pieces.” This would surely be the most bitter pill for Yahoo! to swallow.

Arrington And Fox Business News Discuss Yahoo!