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Google and Yahoo Face Questions About Advertising Merger
By Lily Garza
September 24, 2008
It was big news when Yahoo! signed a deal with Google to share advertising on online searches just hours after rejecting Microsoft’s offer to the same, but now questions have risen about what this deal will mean for newspapers and advertising prices.
Under the new deal Google would provide advertising for an undisclosed amount of Yahoo’s search pages. Advertising on internet search pages represents the largest source of internet advertising in the U.S. The Department of Justice is looking into whether this would lead to Google holding a monopoly on internet advertising.
The Paris-based Worlds Association of Newspapers (WAN), an association of over 18,000 newspapers worldwide, has expressed concern about what the deal will do to newspaper advertising revenue. It has requested that the U.S. Department of Justice, the European Commission, and the Competition Bureau of Canada all review the deal.
"In our view, the proposed advertising deal between Google and Yahoo would seriously weaken that competition, resulting in less revenues and higher prices for our members. WAN is also concerned that this deal would give Google unwarranted market power over important segments of online advertising," Gavin O'Reilly, WAN president, said in a letter to the three agencies.
On September 14, the Association of National Advertisers also announced that they oppose the deal and want the Department of Justice to block it.
The Department of Justice is using a recent yearlong study on the state of competition and monopoly law to review the deal. The report, issued on September 8, analyzes some of the actions by a company that could be considered anti-competitive and makes recommendations on the standards to use, or scrap, given the state of antitrust law, according to the National Law Journal.
Many feel that once Google, the top search engine, shares its ads with the #2 search engine, Yahoo, it will begin to control the market completely. The two search engines together account for 80% of the search engine market. Advertisers will migrate more to Google than Yahoo because they will be able to reach both sites with one deal. This could lead to Google’s monopoly of the market and will weaken Yahoo even further.
According to a PC Magazine article, Microsoft criticized the deal but Google and Yahoo insisted that they would remain independent competitors in the online advertising space. Microsoft said the match up would create an unprecedented level of concentration in search advertising, produce fewer choices for advertisers, result in higher prices, and create privacy concerns.
When the deal was announced in June, the companies said they would not implement it for three months to give the Justice Department time to review it. But as that time comes to a close, the industry is waiting on a verdict.
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