Ad Buyers Still Skeptical of Google-Yahoo Deal

Two-Year Window and 25% Cap Doesn't Erase Doubts

By Published on .

NEW YORK ( -- Critics of the search deal between Yahoo and Google have not changed their point of view even after the companies made concessions to help get Department of Justice approval. The concessions include capping the percentage of search revenue Yahoo can earn from the deal at 25%, and reducing the length of it from 10 years to two.

Ad Age spoke to several advertising buyers who have been skeptical of the deal's merits and they said the revised version did not reverse their point of view.

"The new terms don't really change anything [for us]," said one client, who wished only to speak on background because the client's firm's business model is heavily reliant on Google and, to a lesser extent, Yahoo. "You have to wonder why they still go through with it since it is still controversial and now less profitable for them."

Highlights Yahoo's weakness
Bill Leake, who runs Apogee Search, an Austin, Texas-based company, said the deal "highlights how weak Yahoo is, that this watered-down deal still makes Yahoo more money than it could make on its own. The deal is good for Google, bad for Microsoft, and for savvy advertisers I see no value."

Mr. Leake believes those savvy advertisers can already easily manage keywords on multiple search engines and generally get cheaper prices on Yahoo. Allowing Google to serve ads on Yahoo would be more convenient to those advertisers who only use Google, but would raise prices for others that use multiple search engines.

The deal as originally outlined had Google selling paid advertising next to some Yahoo search-query results, with the companies sharing revenue. Yahoo has said it would mostly serve Google ads next to less popular search terms for which it wasn't already running ads. But the deal ran into resistance fairly quickly -- Microsoft was the first that lobbied heavily against it and soon the deal was facing scrutiny from Washington, including several congressional committees and the Justice Department. In September, the Association of National Advertisers advised against the deal.

When asked whether any of the reported changes to the deal's structure would change his mind, Michael Lee, executive director of the International Advertising Association, which opposed the deal, said "No. I talked to a few people today and I think there's a feel that they've shuffled the pieces around a bit but issues of competition and pricing are still at the heart of the arrangement."

"We are continuing to have cooperative discussions with the Department of Justice about this arrangement and agreed to a brief delay in implementing the agreement while those discussions continue," a Google spokesman said. "We are confident that the arrangement is beneficial to competition, but we are not going to discuss the details of the process." A Yahoo spokesperson declined to comment, saying only that discussions were ongoing.

While both Google and Yahoo have pushed for the deal, it's clear Yahoo has more to lose if it doesn't go through. Should that happen, it will open up new questions about what Yahoo's next move should be and will be.

Some still eager for Microsoft deal
Several clients opposed to the deal said they would like to see Yahoo partner with Microsoft, which is exactly the scenario the deal was meant to help the company avoid. In its original form, the arrangement was expected to goose Yahoo's fresh cash flow by $250 million to $450 million in the first year. (There is little evidence the deal placated shareholders as Yahoo's stock price fell 9% in the two weeks following its announcement.)

Proponents of the deal argue that keeping Yahoo independent is important, and that while Microsoft may prove a stronger Google competitor with Yahoo's assets, it would ultimately mean one less major player in the online ad space.

Some, including Curt Hecht, president of Publicis's VivaKi division, said the deal will lead to more relevant advertising for consumers and marketers.

Rob Norman, CEO of Group M Interaction, is perhaps the highest-profile agency exec to caution against the deal. He noted today on his blog that several questions remain unanswered, including the basis on which the deal can be extended or expanded, what kind of data advertisers will get when buying keywords that appear on Yahoo, and why 25% is a revenue cap vs. a query volume cap.

Regarding the second concern, he said, "We need data at the keyword level. Today we get that from Google on and from Yahoo on If we buy on Ask or AOL via Google we do NOT get data at the keyword level. If the same applies to Yahoo, advertisers lose visibility and good decision-making data."

He also suggested the 25% cap should refer not to revenue but the long tail queries that Yahoo has said it would use Google to better monetize. "If [the cap] is on revenue, the deal could operate on the popular (head) terms and ... significantly effect data on high-click volume terms," he wrote.
In this article:
Most Popular