Opposition to Google-Yahoo Search Deal Heats Up

ANA's Criticism Is a Key Victory for Opponents

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NEW YORK (AdAge.com) -- In one of the first public displays of opposition to the Google-Yahoo search deal on behalf of marketers -- as opposed to agencies or competitive media sellers -- the Association of National Advertisers has come out against the proposed partnership.

So far, some agencies and competitive media sellers, such as Microsoft, have spoken out against the deal. But opponents have suggested it will take major corporations, such as those that are part of the ANA, to really put pressure on the partnership. In this way, the ANA's stance is seen as a major development.

Concerned about diminished competition
ANA President -CEO Bob Liodice on the ad group's website said he sent a letter to Thomas O. Barnett, assistant attorney general at the U.S. Department of Justice, citing objections to the deal. Specifically, the letter includes "concerns that the partnership will likely diminish competition, increase concentration of market power, limit choices currently available and potentially raise prices to advertisers for high-quality, affordable search advertising."

The Justice Department is investigating the deal, which has Google supplying search ads for a portion of Yahoo search queries. The Senate Judiciary Committee is also looking into it.

The letter was authorized by the ANA board, a group whose members include marketing executives at some of the world's largest companies, including General Motors and Wal-Mart. Recently in Ad Age, two major ad agency executives voiced disparate views of the deal's potential. Rob Norman, CEO of WPP's Group M Interaction, said the deal could set off a chain of events leading to a monopoly and higher prices of goods for consumers. Curt Hecht, now president of Publicis' VivaKi Nerve Center, suggested it would lead to greater ad relevancy for consumers and advertisers.

Keeping quiet
Yahoo and Google have offered scant public information about the partnership, although Yahoo did say it expects the deal to generate $800 million in additional annual revenue and $250 million to $450 million in cash flow during its first year of implementation. The companies say the agreement is non-exclusive and that it is a move toward a more open search marketplace. But deal opponents say that because Google makes more money per query than Yahoo, it will beat Yahoo on almost every search term for which the option of a Google ad is available, thereby creating a de facto exclusivity.

In a statement, Yahoo said it was "disappointed" with the ANA's decision. "Yahoo remains steadfast in its belief that this deal -- in which prices are determined by advertiser demand-driven auctions and not by collaboration between Yahoo and Google -- will strengthen Yahoo's competitive position in online advertising and will help to drive a more robust, higher-quality Yahoo marketplace for our advertisers," the company said.

"Numerous advertisers have recognized that this agreement will help them better match their ads to users' interests, and that ad prices will continue to be set by competitive auction," Adam Kovacevich, a Google spokesman, said in an e-mail. "While some have raised questions about the agreement's potential impact on ad prices, advertisers care far more about getting a good return on their advertising dollar than they do about buying cheap ads that don't bring in customers, and this agreement will clearly help advertisers reach Yahoo users more efficiently."

Yahoo and Google believe the deal is not subject to regulation but agreed to delay implementation for three and a half months until the Justice Department could take a look at the pact. The deal was struck June 12.
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