Google-Yahoo Deal May Be In Jeopardy - InformationWeek

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10/31/2008
11:41 AM
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Google-Yahoo Deal May Be In Jeopardy

The Internet companies may abandon their ad-sharing agreement in the face of government scrutiny.

Yahoo and Google may be on the verge of calling off plans for an advertising search deal.

The Wall Street Journal has reported that the deal may be in jeopardy as the U.S. Department of Justice investigates whether it would hurt competition in the search advertising market. The two companies have been working with officials at the Department of Justice, but Google leaders may be losing patience, according to the report.

Both companies have been trying to convince Justice officials that placing Google ads next to Yahoo search results and sharing the profits would not curb competition from other companies like Microsoft. The Justice Department doesn't have to approve the deal, but it could block the plan.

Google and Yahoo had planned to launch the arrangement in September, but they postponed because of the Department of Justice investigation, rather than risking interruption after the ad-sharing agreement was under way. Authorities in the European Union and Canada also are investigating the ad-revenue-sharing plans. Consumers, businesses, and advocacy groups have complained that the deal would concentrate too much power in one place.

Competitor Microsoft has said that the partnership would send 90% of search ads to Google, which already dominates Web search and search ads. Advertisers have complained that the partnership could increase their costs.

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

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.

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