Google Inc.'s search advertising
deal with Yahoo! Inc. appears to be on its last legs as antitrust officials question the alliance's dominance of the search market. Yahoo! CEO Jerry Yang has said the Google deal may add $800 million a year to sales. That figure may get slashed if they hope to receive approval from the Department of Justice. And if too many concessions are made, the deal could no longer make sense.
Yahoo! and Google have been delaying the start of the alliance since mid-October while negotiating with the DOJ. The Wall Street Journal reported, citing sources, that the Internet giants
submitted a new plan over the weekend, which would cap the revenue Yahoo! can generate from the deal to 25% of Yahoo!'s search revenue and shorten the length of the agreement to two years from up to 10 years. The report says there was no revenue cap before and the new plan also specifies that Google advertisers can opt out of having their ads displayed on Yahoo! sites.
Our sister blog Tech Confidential notes
a decision on the Google-Yahoo! matter will likely come soon because Assistant Attorney General Tom Barnett is expected to announce his resignation within days. TC says the administration had asked officials to remain until the election, but historically, a deputy fills the slot in an acting capacity until the inauguration.
Public opinion of the deal isn't good, either. Last week, Texas Republican Joe Barton
sent a letter to the DOJ saying the search ad partnership should be "thoroughly investigated," and, as Reuters notes, consumer organization U.S. Public Interest Group said the plan
could harm consumer privacy. In September, the Association of National Advertisers, a trade group that represents major companies such as Procter & Gamble Co., General Motors Corp. and Apple Inc., sent a letter to the Justice Department
condemning the deal. Around that time, it was
reported that Paris-based World Association of Newspapers, which represents about 18,000 newspapers, said ad deal would lower revenue for individual newspaper Web sites and cut costs of paid search ads.
Analysts have noted that Yahoo! may be forced into a search deal with one-time suitor Microsoft Corp. J.P. Morgan Chase & Co. analyst Imran Khan said
a deal outsourcing Yahoo!'s search to Microsoft could net the company an additional $725 million or so in operating cash flow and $1.4 billion in cost savings.
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Baz HiralalGo to the WSJ story
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