Google, Yahoo Search Ad Partnership Put On Hold
Yahoo said on Friday it has decided to delay implementing a controversial search advertising partnership with Google Inc.
"The companies have agreed to a brief delay in implementing this agreement to continue our ongoing discussions with the (U.S.) Department of Justice," Yahoo said in a statement. "We have had discussions with regulators and look forward to responding to their questions about this agreement."
Google issued a similar statement on Friday:
"When we announced our advertising agreement with Yahoo in June we agreed to delay its implementation until October to give regulators time to look at the details. As we are still in conversation with the Department of Justice we have agreed to a brief delay in implementing the agreement while those discussions continue," the company said.
A source familiar with the discussions on the issue said the delay was expected to last less than a month. "We’re still looking at the time frame of October," the source said.
Google would be able to sell advertising for some of Yahoo’s online advertising space, a deal that is unpopular with advertisers who fear higher prices. According to comScore Inc, Google’s web-search market share widened to 63 percent in August, while Yahoo dropped to 19.6 percent and Microsoft Corp slipped to 8.3 percent.
"We’re gratified that Google and Yahoo are delaying," said Bob Liodice, president and CEO of the Association of National Advertisers.
Google uses an algorithm that aims to match consumers with what it says are the most appropriate ads, a formula some advertisers find mysterious and bothersome.
In June, the deal announced to share advertising was widely seen as an effort to help fend off Microsoft’s efforts to acquire Yahoo, by bringing Yahoo an additional $800 million in annual revenues.
The delay was probably not a good sign for Google and Yahoo, according to an antitrust lawyer, who regularly brings mergers to the Justice Department.
"It means that they were not going to get a clean bill of health in time, and perhaps it’s much worse than that. They don’t want to go forward and be told that there’s potentially a very serious problem there," said the lawyer.
Previously, there had been signs that the planned partnership was running into trouble with the Justice Department, in particular reports that the agency had brought on board top litigator Sandy Litvack to work on the deal.
Litvack was the department’s antitrust chief under former U.S. President Jimmy Carter and Walt Disney Co’s former vice chairman.
Google’s argument is that the tie-up means the two companies could work together to improve the chances that consumers will be more likely to get ads for products they will want to buy — thus giving advertisers more bang for their buck. It has also said that since it sells its advertisements by auction that it has little control over prices.
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