Yahoo agree Google ads deal
Yahoo has finalised a deal with Google which will see it carrying Google’s online advertising alongside its own search results.
The agreement comes after months of negotations with Microsoft and will effectively end the Seattle company’s interest in Yahoo.
According to Yahoo, the deal to carry Google advertising on its search portals could be worth as much as $800 million a year in extra revenue.
Industry experts say that although the deal will benefit Yahoo, the real winners will be Google, who have solidified their position as the dominant player in online search and ad-serving.
“Google has made an enormous gain strategically. This move might well have shut Microsoft out of the online space altogether,” commented Jeffrey Lindsay, analyst for Sanford Bernstein.
Google had previously expressed concerns that were a merger deal between second and third placed Yahoo and Microsoft, it would be bad for the search market and could raise anti-trust issues.
In turn, Microsoft has fired back and said that Google (which controls around 60 percent of search in the US) tying up advertising with Yahoo, is anti-competitive.
Both Yahoo and Google deny that the arrangement is anti-competitive, stressing that it is a deal rather than a merger, but they have hedged their bets against possible anti-trust law-suits; the 10 year ad deal has a get-out clause allowing either party to back out in case it falls foul of litigation or if there are management changes at Yahoo.
There are signs that the deal will come under close scrutiny, with the Senate Anti-trust Subcommittee indicating they would look at it in detail.
“This collaboration between two technology giants and direct competitors for Internet advertising and search services raises important competition concerns,” said Senator Herb Kohl, Subcommitte chairman.
For the moment however, both Yahoo and Google remain bullish.
“This commercial agreement provides Yahoo with the opportunity to deliver more relevant ads to users and provide advertisers and publishers with better advertising technology,” said Google CEO Eric Schmidt.
“We believe that the convergence of search and display is the next major development” added Yahoo CEO Jerry Yang.
Although their company may be seen to have lost out, many Microsoft shareholders will be relieved that a potential merger has, at least temporarily, averted. Investors believed the price Microsoft were being asked to pay for Yahoo was too high and Microsoft shares have risen 4 percent since the Yahoo-Google deal has been announced.
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