The trade association representing 400 of the nation's largest advertisers has come out against a major advertising partnership between Google and Yahoo that is currently under review by federal and state regulators. In a letter to the U.S. Justice Department, the Association of National Advertisers (ANA) said the deal would create an entity that controlled 90 percent of all search advertising, and warned that the tie-up could drive up prices and diminish competition. Through the partnership, Google would serve a portion of the ads on Yahoo's search pages. The companies have defended the deal as a way to boost Yahoo's search revenue while providing advertisers a better way of reaching Yahoo's considerable online audience. The reaction from the advertising industry has been mixed, with some marketers warning that ceding more business to Google's auction will drive prices up and undermine competition, while other maintain that the search-engine marketing is essentially self-regulatory, since keywords are sold at auction. In its response to the ANA letter, Google was quick to highlight the latter view. "Numerous advertisers have recognized that this agreement will help them better match their ads to users' interests, and that ad prices will continue to be set by competitive auction," Google spokesman Adam Kovacevich told InternetNews.com. "While some have raised questions about the agreement's potential impact on ad prices, advertisers care far more about getting a good return on their advertising dollar than they do about buying cheap ads that don't bring in customers, and this agreement will clearly help advertisers reach Yahoo users more efficiently." For its part, Yahoo said it was "disappointed" with the letter, and "remains steadfast in its belief that this deal ... will strengthen Yahoo's competitive position in online advertising and will help to drive a more robust, higher quality Yahoo marketplace for advertisers." Both companies have said that they will continue to compete vigorously with each other in search and other areas. The ANA counts many of the country's largest advertisers as members, including Procter and Gamble, Unilever, General Mills and ExxonMobil. In a brief note on the ANA Web site, the group's president and CEO, Bob Liodice, announced that the association had sent the letter to Thomas Barnett, assistant attorney general at the Department of Justice's antitrust division. Liodice said that the ANA's board had conducted a month-long analysis of the ad deal, which included meetings with executives from Google and Yahoo. He did not immediately respond to requests for further comment. Google and Yahoo clearly structured the deal with regulators in mind. The non-exclusive deal does not require Yahoo to import a minimum number of ads from Google, and it only applies to the United States and Canada, thereby avoiding the tougher regulatory review the companies would find in Europe. Because it is not a merger, Google and Yahoo were not required to obtain regulatory approval before they implemented the ad deal, but they voluntarily put it on hold to accommodate a review. The Justice Department is currently taking a look at the antitrust implications, as are more than a dozen states' attorneys general. Microsoft has been among the most vocal opponents of the deal. It was Microsoft's failed bid to acquire Yahoo that compelled the portal giant to ally itself with Google as a way to deliver value to shareholders frustrated with the Web pioneer's slumping stock price. Yahoo expects the deal to ultimately generate $800 million in annual revenue. In testimony before a Senate subcommittee earlier this summer, Microsoft General Counsel Brad Smith described Yahoo's talk of "better monetization opportunities" as "a fancy way of talking about a price increase." "The technology is complicated, but the antitrust issues are straightforward," he said at the time. Microsoft, which declined to comment for this story, has been lobbying advertising executives to speak out against the deal to regulators, according to a report in The Wall Street Journal. Microsoft is a member of the ANA, though in his statement, Liodice said that the ANA's analysis was independent and that the conclusion included the input of the association's board, which has more than 30 directors. This article by Kenneth Corbin originally appeared Sept. 8, 2008 at InternetNews.com.
Google & Verizon Becoming Frenemies?
