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10/6/2008
02:26 PM
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Google, Yahoo Postpone Ad Deal, For Now

The companies said they would hold off while the U.S. Department of Justice investigates complaints that the deal would concentrate too much power in one place.

Yahoo and Google have postponed plans for an ad partnership while the federal government investigates whether the deal would be anti-competitive.

The companies announced Friday that they would hold off on the agreement while the U.S. Department of Justice investigates complaints from consumers, businesses, and advocacy groups claiming the deal would concentrate too much power in one place.

Google dominates search on the Web, and Yahoo is one of its stronger competitors. The deal would allow Google to place its ads next to Yahoo search results. The two companies would share the profits.

The Justice Department is trying to determine whether the ad partnership would be anti-competitive. Authorities in the European Union and Canada also are investigating the deal.

Microsoft claims that the partnership would send 90% of search ads to Google, and advertisers have said that it would increase their costs.

Yahoo and Google have said they will continue to compete in the search market under the arrangement, and both companies have insisted the partnership is good for competition.

They had planned to forge ahead with the ad partnership this month, but the companies could risk interruptions and losses if the government imposed restrictions on them after the ad arrangement was under way.

Yahoo CEO Jerry Yang is looking to the deal as a way to increase profits as ad revenue growth slows. The two companies announced the agreement after Yahoo rejected Microsoft's takeover bid.

Yahoo's shares had dropped nearly 7% shortly after 2 p.m. Eastern time Monday, to $14.90. Earlier in the day, they had fallen to $14.74, below their previous 52-week low of $15.54. Google shares were also down more than 7%, to $358.13. Google's previous 52-week low was $380.71.

Although the Justice Department has been tight-lipped about the investigation, it's widely expected to conclude this month.

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