Tuesday, 30 September 2008

Google, Yahoo Deal Still Has a Lot to Go Through

A Washington think tank devoted to antitrust issues has issued a 19-page analysis of the Google-Yahoo deal that warns that the transaction has the potential to become a black hole that swallows up Yahoo.

The proposed partnership could be blocked by the U.S. Justice Department based on Google and Yahoo's combined share of the search advertising market, the lack of new entrants into the market and the absence of market efficiencies being created by the deal, said nonprofit American Antitrust Institute (AAI).

Several provisions that would maintain competition in the ad market during a Google Yahoo partnership include prohibiting Yahoo from using Google ads on search results outside North America and on third-party Web sites.

In addition, Google and Yahoo should be prohibited from setting minimum prices and Yahoo should be prevented from using Google ads in place of its own, the AAI said. Finally, the two companies should share revenue based on a fixed formula per click, preventing Yahoo from being rewarded with a higher share for using more Google ads.

In June, Google and Yahoo announced a deal that would allow Yahoo to place some Google ads on its search results. The arrangement has been widely seen as an effort to help Yahoo fend off Microsoft by helping it earn another USD 800 million annually.