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Industry Trends

Google-Yahoo! Deal Upsets Advertisers

By September 10, 2008July 30th, 20233 Comments

The Google-Yahoo! partnership, which was announced in June, does not seem to be finding favour with advertisers. Though advertisers have refrained from speaking out against the deal individually, they do not seem to be for it as a whole.

The Association of National Advertisers, which represents over 400 major companies, including Wal-Mart, Ford, Procter & Gamble and General Motors, has decided to take a stand against this deal, as they feel that the deal could be bad news for them.

In a letter to Assistant Attorney General, Thomas O. Barnett, the A.N.A. has said that “a Google – Yahoo! partnership will control 90% of search advertising inventory”, which according to them will be bad for the market. They have recommended blocking the deal.

The letter further informs that this deal could result in decreased competition, increased market power for Google, and restricted choices for advertisers, who will then have to pay much higher rates for high quality search advertising services, due to the lack of competition in the market.

After the deal was finalised, Google had opted for a Congressional investigation, while at the same time maintaining that the procedure was not required by law.

As per the terms of the deal, Google will be able to supply areas of Yahoo!’s Web search system, with Google search advertising.

As is well known, Google already controls 70% of the search market in the USA, and this deal will give them further monopoly. This matter has raised concerns regarding anti-trust laws. Google, however is very confident that there is nothing irregular about the deal.

Microsoft’s earlier complaint against such a deal did not yield any significant result, but according to the Wall Street Journal, the letter by the Association of National Advertisers may carry more weight.

As a defense against allegations of monopolising the market, Google and Yahoo! state that theirs is not an exclusive deal, and Yahoo! will retain the right to have similar agreements with other companies. Yahoo! also states that the deal will not raise prices, but will help Yahoo! to generate more revenue and improve their position in the market.

The Justice Department has not made any comment on the matter so far, but has gone ahead and appointed litigator Sanford Litvack to head a possible anti-trust investigation against Google. Luckily, Litvack is no stranger to technology. He was on the board of Hewlett Packard and Compaq, and was also an assistant attorney general, in the justice departments anti trust division in the late 1970’s.