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Amazon.com Dumps Yahoo!

Like a classic he said, she said, there seemed to be an awful lot of confusion amongst analysts and investors alike who were dissecting Amazon's partnership with Yahoo! , which expired on Tuesday. Yahoo! may have successfully replaced the online bookseller with rival barnesandnoble.com , but make no mistake here - Amazon dumped Yahoo!.

Under the old three-year pact, Amazon received top billing under Yahoo's search results as its preferred book vendor. You know what I'm talking about. Type in a search result, any search result, and Yahoo invariably tries to suggest an irrelevant spam link to some loosely related book on the subject. We know it costs an arm and a leg for the preferred vendor spot, but it's not terribly creative; and at the end of the day, it's difficult to pin down how effective a marketing tool it is.

At first, media pundits painted the appearance that Amazon got the snub from Yahoo, and that its closest competition BN.com scored a coupe by securing the vendor position. Nonsense. BN.com is a me-too wannabe with a broken-down share price that's been playing follow-the-leader ever since Jeff Bezos ate the bookseller's lunch. So, no surprise here that BN.com shadows Amazon yet again, while wondering how come investors still won't award it a billion-dollar market cap too. Shares of BN.com did manage to nudge up a buck and change to $6 on the news.

Instead of negotiating a new contract with Yahoo, Amazon decided to pass and extend its partnership with America Online last month. A spokewoman for Amazon called the AOL deal, "more compelling for various reasons." Well naturally, I've got a few good ideas what those compelling reasons are.

Right off the bat, it boils down to price related to return on investment. Yahoo charges big bucks to carry a preferred vendor - that's no secret. But how much foot traffic does a site like Amazon get from a spam link on Yahoo's search results? Relatively speaking, probably not enough to justify the cost. Amazon.com's brand is far more mainstream amongst plain vanilla consumers both online and off than Yahoo's. While consumers who know Yahoo on a first name basis are already familiar with the Amazon.com brand, I question whether the same holds true vice versa.

Sure, Web surfers go to Yahoo for all kinds of things. And every single page on the portal is jam-packed with information. Some might say too much information. I'm not sure about you, but my eyes are trained to zoom in on just what I'm looking for, exactly where I know it'll be. Perhaps most telling, I rarely ever use the ultra-commercialized Yahoo portal as a search engine. There are just too many sites that do a superior job, minus the hassle of digging through information overload. Just ask Google.

The bottom line is, Amazon has simply outgrown Yahoo, with both sites' target demographics beginning to show signs of excessive overlap. That means Amazon's greenbacks are best spent elsewhere.

Love 'em or hate 'em, AOL holds more than 20 gazillion eyeballs hostage through its Internet access, Web browser, and instant messaging gizmos. And I mean that in a good way. Through its proprietary interface and slick packaging, AOL never lets its users forget its ubiquitous brand. In some respects, Yahoo operates little more than a Web site while AOL operates a mini World Wide Web. That not-so-subtle difference allows AOL to better monetize its own traffic, while also giving preferred advertisers better bang for the buck.

AOL said its members spent $4.9 billion on its shopping services in the latest quarter, doubling from a year-ago-same-period. And you just can't argue with the numbers. The ISP has also given its shopping service a makeover with added features and better usability. Meanwhile, Yahoo's