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Google CEO won't delay Yahoo deal any further
2008-09-18
MOUNTAIN VIEW, Calif. - Google Inc.'s chief executive said Wednesday the Internet search leader won't delay its proposed advertising partnership with rival Yahoo Inc. even if government regulators need more time to assess whether the alliance will diminish competition. After voluntarily delaying the start of the Yahoo deal three months ago to give antitrust regulators time to review the potential impact, CEO Eric Schmidt said he isn't willing to wait very much beyond an Oct. 11 deadline spelled out in the companies' contract. "Time is money in our business," Schmidt told reporters in a 75-minute meeting that covered a wide range of topics. He declined to predict whether regulators might try to block the partnership. "While we have been talking to regulators, we don't know what their position is," Schmidt said. "We don't know if they think it's a good deal or poor deal." The pact between Google and Yahoo raised competitive concerns because the two companies combined control more than 80 percent of the rapidly growing U.S. market for advertising connected to Internet searches. Microsoft Corp. and a large group of advertisers have complained that Google will gain too much pricing power by linking up with Yahoo -- an assertion Google disputes because its rates are set in an auction-style process. Yahoo also has the right to pick which Google ads to show on its site. Antitrust regulators are nevertheless taking a hard look at the partnership, and recently hired an outside lawyer to help review evidence in the case so far. Schmidt blamed the backlash against the Yahoo partnership on Microsoft's lobbying and Google's own inability to explain the benefits more clearly. "There is a natural fear of things getting larger," he said. By forging the partnership, Google provided Yahoo an escape from Microsoft, which spent five months trying to buy Yahoo in its entirety or at least its online search engine. Yahoo now desperately needs the Google partnership to pan out to avoid further inflaming shareholders already upset about the company's decision to reject Microsoft's last takeover offer of $47.5 billion, or $33 per share. Microsoft withdrew the bid after Yahoo Chief Executive Jerry Yang sought $37 per share -- a price that Yahoo's stock hasn't touched since early 2006 and is unlikely to reach any time soon. Yahoo shares fell 44 cents to $18.82 Wednesday. By relying on Google's superior technology, Yahoo thinks it can boost its annual revenue by about $800 million. Google hasn't said how much it expects to make from the deal, only that it won't rake in as much money as Yahoo. Sitting alongside Schmidt, Google co-founder Sergey Brin said the company believes in giving the majority of advertising revenue to its partners because "we don't want them to resent us in the future. We feel like putting up content is a lot of work." Brin also said Google felt obligated to help Yahoo because its co-founders, Jerry Yang and David Filo, played an instrumental role in persuading Brin and his partner, Larry Page, to turn Google into a company 10 years ago. Google's own stock has been hit hard amid fears that the spreading economic trouble around the world will cause advertisers to curtail the spending and slow Google's rapid growth. Google shares dropped $28.44 Wednesday to finish at $414.49 -- a 40 percent drop from the price at the end of last year. But Schmidt and other Google executives insist that the Mountain View, Calif.-based company will continue to do well even in a recession because its system charges advertisers only when consumers click on a marketing link. And many of those clicks culminate in sales, something that advertisers are struggling to get more desperately than ever. "I think we have benefited from the economy slowing," said Tim Armstrong, who heads up Google's advertising sales in North America. The upheaval in the banking system hasn't rattled Google either because the company's $12.7 billion in cash is concentrated in "very, very boring investments," Schmidt said. "The drama is in New York, not here. It's business as usual at Google."
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