Things are finally getting serious in the industry-wide debate over the Yahoo-Google deal. When the two companies announced their blockbuster ad deal in June, they said that they would wait three and a half months before putting it in place, giving regulators a chance to review it. The companies have until the end of next week to walk away before the contract takes hold and Yahoo begins importing a certain amount of ads from its larger rival to place along its own search results pages. Now, as the self-imposed moratorium draws to a close, and on news that the Department of Justice had hired renowned antitrust litigator Sandy Litvack — perhaps to pursue a lawsuit to block the deal — the past week has seen a surge in lobbying from concerned parties on both sides of the matter. Most recently, Yahoo President Sue Decker broke the company's long public silence on the issue in a company blog post. Writing under the headline, "Myth-busting and the Yahoo-Google Agreement," Decker took aim at opponents' principal objections, such as the contention that the deal would see Yahoo slowly exit the search market by ceding its advertising business to Google, with the ultimate effect of raising prices for advertisers. "You may have heard that the agreement gives Google control over 90 percent of search advertising," Decker wrote. "That's just plain wrong." Decker repeated her contention that the nonexclusive Google deal is simply a way of "backfilling" search queries with relevant ads that Yahoo doesn't have in its network. The idea is that with millions Yahoo users making so many search queries, it is simply not possible for any one company to maintain a large enough repository of ads to make a relevant match with every query. "Not even Google," she wrote. "The core idea is limited use of Google ads to deliver more value from our [search results pages] and other inventory in circumstances where we aren't delivering the best advertiser value today, and then to use resources gained by that strategy to accelerate our investments in the technologies and marketplaces of the future." To Microsoft, that idea sounds a little disingenuous. A company spokesman declined to comment for this story, saying that the testimony of Brad Smith, Microsoft's general counsel, before a Senate subcommittee earlier this year still reflected the company's position. Smith testified that any form of deal between Google, which commands somewhere around 70 percent of the search market, and its nearest competitor would be patently illegal on antitrust grounds. Mounting RhetoricThe stakes in the debate are high: Yahoo expects to rake in an additional $800 million in annual revenue and Google would certainly expand its own formidable search-revenue stream. Microsoft — a committed opponent of the deal — has warned that an alliance of the two leading players in search advertising would bring the market dangerously close to a monopoly. Of course, Yahoo's ad deal with Google also comes on the heels of its protracted rebuff of Microsoft's takeover bid, a gambit Microsoft made in the interest of creating a viable competitor to Google in search advertising. So far, Microsoft's position has been to encourage regulatory authorities to step in to halt the companies from working together. Google and Yahoo's partnership has been under a formal antitrust review by the DoJ since shortly after it was signed. In the following months, regulators in several states and Canada have opened their own investigations, as have antitrust authorities in Europe, though the ad partnership would only apply to Yahoo's sites in North America. Because the deal is a business partnership, not a merger, Yahoo and Google did not need regulatory approval. They instead opted for the voluntary delay after a preliminary meeting with DoJ officials. So while the regulatory purview is a little nebulous, and the deadline is something of a moving target, the stakeholders' increasing rhetoric signals that the issue may finally be coming to a head. Privately, both Google and Microsoft accuse the other of leading the lobbying charge either for or against the deal. Google, Yahoo and Microsoft have each set up microsites advancing their position, and representatives of all three companies have been meeting with officials from the Justice Department and lawmakers. In addition to the key players weighing in, the DoJ's antitrust division has received at least two letters in the past week from concerned lawmakers. One came from a group of California Democrats, including Reps. Anna Eshoo and Zoe Lofgren, urging the department not to hold up the deal. "To our knowledge, the DoJ has never before taken preemptive action against a nonexclusive contractual agreement of this type," they wrote, warning that increased regulatory scrutiny could threaten the growth of the industry. The tenor of that letter contrasts with one sent by a bipartisan group of members of the House Judiciary Antitrust Task Force, warning that "competition in the online-advertising market could be significantly constrained under a prospective Google-Yahoo agreement." The letter urged the DoJ to closely examine the deal. A spokesman for Rep. Steve Chabot, R-Ohio, one of the letter's signatories, said the DoJ had not yet responded. Spokesmen for both Google and Yahoo offered statements reiterating their belief that the deal will ultimately benefit competition. Some of the concerns expressed in the House Judiciary Antitrust Task Force's letter, including the absence of details about the partnership's contract, found voice in a white paper authored by Norman Hawker, a law professor and senior fellow at the American Antitrust Institute (AAI). Hawker concluded that the anticompetitive risk depended on whether Yahoo remained a significant player in the search market. His somewhat ambivalent takeaway was that the deal, on the whole, had significant anticompetitive risks, but it could also be good for the market if it helped reinvigorate Yahoo as a viable No. 2 in search advertising, as both Yahoo and Google are promising. Still, Hawker concluded, "The parties' statements of good intent cannot be relied upon to override the economic incentives that may be generated by this agreement to engage in what may turn out to be anticompetitive conduct." He urged regulators to broker conditions with the two parties that would create competitive safeguards such as a pledge that Yahoo wouldn't import a search ad from Google when it had one of its own to sell. In a statement e-mailed to InternetNews.com, Google spokesman Adam Kovacevich said, "While we disagree with AAI's conclusions, it is noteworthy that even a group that has opposed most deals acknowledges the pro-competitive elements of our agreement with Yahoo. We believe strongly that this deal is good for competition and will benefit advertisers, Web site publishers and consumers." A Microsoft spokesman said the Redmond, Wash. software giant believed that any form of deal, even with the conditions the AAI recommended, would presage Yahoo's gradual exit from the search market and would be therefore unacceptable from a competitive standpoint. This article by Kenneth Corbin appears courtesy of InternetNews.com.
Advertisers Cry Foul on Yahoo-Google Deal
