labels: Yahoo!, Google, Advertising / branding
Yahoo, Google offer to water down advertising deal to get regulatory approval news
04 November 2008

Only days after it emerged that Yahoo and Google may be looking at terminating their search deal amidst an ongoing regulatory review and fears expressed by advertisers that the partnership would lead to higher advertisement rates (See: Google, Yahoo trying to delink!), the two companies have offered to significantly narrow the scope of the planned partnership in a last-minute effort to win the approval of the US Justice Department.

The advertising deal calls for Google to place ads next to some web search results on Yahoo, lifting Yahoo's revenue. Under the revised terms, the deal would be shortened to two years, from the 10 mentioned in the original agreement.

In addition, the amount that Yahoo could earn from ads placed by Google would be capped at 25 per cent of Yahoo's search advertising revenue. Previously, Yahoo had the discretion to decide how much of its search ads to turn over to Google. (See: Yahoo strikes $800-million ad deal with Google, ends talks with Microsoft)

Analysts said the new terms could help the deal get past regulators, but questioned whether such a limited partnership would be financially lucrative to Yahoo, which is a distant No 2 to Google in the web search market.

While the Justice Department does not comment on pending merger matters, there had been hints that it planned to challenge the partnership in its original form - particularly by hiring veteran litigator Sandy Litvack to work on the probe. Litvack was the department's antitrust chief under President Jimmy Carter and was Walt Disney Co's former vice-chairman. (See: Advertisers opposes Yahoo-Google ad deal; authorities may take antitrust action)

Shares of Google and Yahoo were little changed in extended trading after news of the modified proposal broke. Google edged up $1.51 to $348 from its $346.49 close, while Yahoo slipped 7 cents to $12.68 from its $12.75 close.


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Yahoo, Google offer to water down advertising deal to get regulatory approval