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9/8/2008
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Ad Industry Group Opposes Google-Yahoo Partnership

The Association of National Advertisers' letter to the DOJ warns against limited competition and advertiser choice, concentrated market power, and higher ad prices.

Some of the biggest U.S. advertisers fear that Google's advertising business would become too big if the company's deal to run ads on Yahoo gains approval. The Association of National Advertisers (ANA), an ad industry trade group representing the likes of Proctor & Gamble and Wal-Mart, on Thursday sent a letter to the U.S. Department of Justice arguing that the partnership Google and Yahoo announced in June, scheduled to begin in October, will limit competition and advertiser choice, concentrate market power, and raise ad prices.

Among the approximately 400 companies that constitute the ANA are several that compete with Google, or have conflicting interests, including AT&T, Microsoft, Verizon, and Viacom.

Bob Liodice, president and CEO of the ANA, acknowledged that those companies voiced concerns about the deal but insisted that the ANA's opposition "wasn't on Microsoft's instigation."

Liodice said that the ANA's stance is the result of careful consultation with its members and with Google and Yahoo. "When the deal was announced on June 12, a few advertisers began to raise some natural concerns because the collaboration brought two of the largest players in the search advertising industry together," he said.

Despite discussions with Google and Yahoo, Liodice said that concerns remain among advertisers.

Microsoft has made no secret of its opposition to the Google-Yahoo deal. The company spoke out against the deal at congressional hearings earlier this year. And it has engaged Michael Kassan, an advertising and media consultant, to lobby marketing companies to oppose the deal.

A Microsoft spokesperson said that there wasn't anything unusual about having industry consultants advise and offer counsel to other companies.

Earliest this year, Microsoft was unable to reach a deal to acquire Yahoo, a deal that Google publicly opposed.

Google maintains that its deal with Yahoo -- a non-exclusive advertising arrangement that allows Google to run ads alongside Yahoo's search results -- is good for advertisers.

"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," said Google spokesperson Adam Kovacevich in an e-mailed statement. "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."

Department of Justice antitrust officials have been looking into the deal for several months. It's not yet clear whether the government plans to take any action to modify, delay, or halt the deal.

During congressional hearings about competition in the online advertising industry in July, David Drummond, Google's VP for corporate development and chief legal officer, pointed out that Matt Greitzer, VP of search marketing at Avenue A/Razorfish, reportedly told Bloomberg that the deal "is going to be good news for advertisers."

"When Microsoft's own ad firm -- the group within Microsoft that knows online advertising best -- confirms the benefits of the agreement for advertisers, we should rest our case right there," Drummond said in prepared remarks at the time.

Microsoft acquired Avenue A/Razorfish as part of its $6 billion purchase of aQuantive last year. Last month, AdAge reported that Microsoft is trying to sell the interactive ad agency.

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