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Google ends bid for joint ad partnership with Yahoo
2008-11-05
WASHINGTON (AFP) - Google said Wednesday it was ending its bid for a joint search advertising partnership with Yahoo to avert a "a protracted legal battle" with regulators. David Drummond, senior vice president and chief legal officer at Google, said the deal announced earlier this year faced an uphill fight with US Justice Department antitrust regulators. "After four months of review, including discussions of various possible changes to the agreement, it's clear that government regulators and some advertisers continue to have concerns about the agreement," he said in the Google blog. "Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners. That wouldn't have been in the long-term interests of Google or our users, so we have decided to end the agreement." Drummond added, "We're of course disappointed that this deal won't be moving ahead. But we're not going to let the prospect of a lengthy legal battle distract us from our core mission. That would be like trying to drive down the road of innovation with the parking brake on." The Justice Department said it would have filed suit to block the alliance, claiming it would stifle competition in Internet search advertising by controlling up to 90 percent of the market. "The companies' decision to abandon their agreement eliminates the competitive concerns identified during our investigation and eliminates the need to file an enforcement action," said Thomas Barnett, head of the department's antitrust division. "The arrangement likely would have denied consumers the benefits of competition -- lower prices, better service and greater innovation." Although the firms offered a modified plan, the Justice Department "determined that such modifications would not eliminate the competition concerns raised by the agreement," according to the statement. Yahoo said the ad deal with Google would have pumped up its cash flow enough to "accelerate investments" in top business priorities and be a stronger competitor in the online arena. "Yahoo! continues to believe in the benefits of the agreement and is disappointed that Google elected to withdraw from the agreement rather than defend it in court," the pioneering Internet firm said in a release. "This deal was incremental to Yahoo!'s product roadmap and does not change Yahoo!'s commitment to innovation and growth in search." The Yahoo-Google alliance was announced June 12 after Yahoo fended off a buyout bid from Microsoft. The deal aimed at putting the Internet search king's expertise to work pumping money from advertising posted next to Yahoo Internet search results. But it had faced antitrust reviews in the United States and European Union and criticism from lawmakers, rivals and advertisers worried about the joint venture dominating search advertising -- the text ads that appear when a user searches for a particular subject. Analyst Henry Blodget at Silicon Alley Insider said the end of the plan could put Microsoft back into the picture for Yahoo, even though officially the software giant has indicated it has abandoned its effort to buy Yahoo. "Yahoo's last little bit of leverage in a potential search deal with Microsoft just evaporated," Blodget said. "If Yahoo can get Microsoft back to the table to discuss a search deal, we expect the terms it gets will be significantly worse than the ones it passed on last summer. And that's if Microsoft comes back. Microsoft might just want to see if Yahoo just completely implodes." Blodget said the impact on Google "is minimal." "The reason the company walked, we suspect, is that it realized that subjecting itself to litigation and/or a consent decree would hurt its business and image a lot more than barely material revenue and share gain from the Yahoo deal would help it," he added. "Yahoo is the big loser here."
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