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ANA Oppose Google-Yahoo Advertising Partnership-The Wall Street Journal

Big Marketers Challenge Google-Yahoo Deal
Trade Group Calls for Justice Department To Block Planned Search-Ad Partnership

By SUZANNE VRANICA and JESSICA E. VASCELLARO

September 8, 2008

Some of the country's biggest marketers are rallying to oppose an advertising deal between Google Inc. and Yahoo Inc., as the Justice Department considers whether to go to court to block the agreement.

The Association of National Advertisers, a trade group that represents major companies like Procter & Gamble Co. and General Motors Corp., sent a letter to the Justice Department Thursday calling the deal bad for advertisers and recommending that it be blocked. The group announced the letter on its Web site on Sunday. The agreement, announced in June, gives Web-search giant Google the right to sell search and other text ads on Yahoo sites, sharing the revenue with Yahoo.

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But in an interview, Bob Liodice, chief executive of the ANA, said the group believes the "deal is, on balance, a negative" for advertisers. The trade group has been studying the proposed arrangement for more than a month.

Mr. Liodice said the group is concerned that the deal could raise the price of search advertising. It also is worried about the "concentration of power" that the alliance represents, he said.

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Yahoo executives are banking on the deal -- struck as Yahoo was seeking alternatives to selling its search business to Microsoft Corp. -- to help dig it out of a multiyear slump and restore investor confidence. Yahoo shares closed Friday at $18.08, down from around $30 after Microsoft's failed $31-a-share bid for the company in January. Yahoo executives have estimated that the deal, which isn't exclusive and allows Yahoo to select when to use Google ads, could generate $800 million in annual revenue for Yahoo.

Since the partnership was announced in June, many online advertising executives have expressed concerns that it could diminish competition and boost prices in the market for ads that appear alongside search results. Google and Yahoo dispute that, arguing that since search ads are sold through an auction process, neither company can set prices. U.S., European and Canadian regulators are examining the agreement.

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