Google-Yahoo Ads Deal Under EU Investigation

In June of this year Google and Yahoo brokered a deal in which Google would provide a portion of the advertising on Yahoo for a slice of the revenue.

EU regulators are investigating the deal, in which the two companies would share the ad revenue.  Along with the US and Canada, they feel the deal would have an effect on advertising in the European Union and may violate European anti-trust regulations.

In a recent statement to the AP the Paris based World Association of Newspapers said it wants the deal blocked by US and EU regulators fearing that it could dramatically reduce advertising revenue on websites including those of newspapers claiming that it could give Google too much power in the online advertising market.

Conversely some advertisers fear that the deal will increase the cost of paid search marketing. However in an interview with the LA Times Google’s chief economist, Hal Varian argued that the value of advertising on the two sites will still ultimately be controlled by the advertisers themselves.  If costs go up it will be as a direct result in their perceived value going up.  He claims the deal would mean advertisers get more bang for their buck.

Yahoo hoped that the deal, which would be limited to the US and Canada, would avoid the notorious scrutiny of the European regulators. However the European commission’s Rules on anti-competitive practices may be relevant because the two companies conduct business inside the European Community. The deal will be scrutinized for issues such as price fixing and information sharing.

According to The Guardian the deal could earn Yahoo in excess of $800 million in revenues. Meaning they could fend off takeover bids such as the failed bid by Microsoft earlier this year.  Yahoo hopes the deal can enable them to remain independent, which in the long run will help competition in the industry.

Tags: anti-trust, Google, online advertising, paid search, PPC, Yahoo

This entry was posted on Wednesday, September 17th, 2008 at 11:52 am and is filed under Law, Search. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.