Google Walks Away From Yahoo Ad Partnership
By MIGUEL HELFT
Published: November 5, 2008
SAN FRANCISCO — Google, the Internet company, said Wednesday that it had decided to walk away from an advertising partnership with Yahoo to avoid a legal battle with federal antitrust regulators who had notified the companies that they were planning to file a lawsuit to block the agreement.
Skip to next paragraph Related Yahoo and Google Offer to Revise Ad Partnership (November 4, 2008) Advertising: Google Deal With Yahoo Draws More Opposition (October 6, 2008) Ad Accord for Yahoo and Google (June 13, 2008) Times Topics: Google Inc.Times Topics: Yahoo! Inc. Google Statement Yahoo Statement Justice Dept. Statement
The decision is a setback for both Google and Yahoo, which had proposed to scale back the agreement significantly over the weekend in a last-minute attempt to salvage it. It suggests that Google has become so powerful that its actions will now draw increasingly intense scrutiny from the United States government and regulators elsewhere.
It also leaves Yahoo, which entered into the partnership as an alternative to a merger with Microsoft, scrambling for a new growth plan.
Yahoo said it was disappointed with Google’s decision to walk away rather than defend the agreement in court. But it added that Yahoo was well positioned to continue to compete in the search advertising market.
Google said the companies tried to address the concerns of regulators but in the end fail to persuade them
“After four months of review, including discussions of various possible changes to the agreement, it’s clear that government regulators and some advertisers continue to have concerns about the agreement,” David Drummond, Google’s chief legal officer, wrote on the company’s blog.
Noting that several major advertisers had objected to the deal, Mr. Drummond added: “Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners. That wouldn’t have been in the long-term interests of Google or our users, so we have decided to end the agreement.”
For its part, the Justice Department said the agreement would have turned the No. 1 and No. 2 rivals in search advertising into collaborators, reducing competition. Amendments to the agreement were not enough to eliminate concerns, the department said in a statement.
“The companies’ decision to abandon their agreement eliminates the competitive concerns identified during our investigation and eliminates the need to file an enforcement action,” Thomas O. Barnett, assistant attorney general in charge of the department’s antitrust division, said in a news release. “The arrangement likely would have denied consumers the benefits of competition — lower prices, better service and greater innovation.”
Many analysts and investors have suggested that if the Google-Yahoo deal was scuttled, it could reopen the door for Microsoft to bid for all or part of Yahoo.
“It’s a great win for Microsoft,” said Bryan Wiener, the chief executive of 360i, a digital marketing agency that specializes in search. The move gives Microsoft “a chance to get Yahoo at potentially a much lower price.”
Microsoft offered to buy Yahoo for $33 a share in May. Yahoo’s shares were trading around $14 on Wednesday. Google’s shares were down nearly 3 percent, around $356.
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