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Computerworld: Major advertisers protest Google-Yahoo search advertising deal

 

September 8, 2008

(Computerworld) A trade group that represents large national advertisers like Ford, Sara Lee, Wal-Mart and Pepsi has sent aletter to the U.S. Department of Justice objecting to a proposed Google-Yahoo search partnership.

The Association of National Advertisers — which represents 400 companies that spend more than $100 billion annually in advertising — said yesterday that it sent the letter to Assistant Attorney General Thomas Barnett after what it called a comprehensive independent analysis of the deal, under which Yahoo Inc. would run advertising fromGoogle Inc. alongside its search results.

In a post on the organization’s Web site, ANA President and CEO Bob Liodice said the letter contends that “a Google-Yahoo partnership will control 90% of search advertising inventory” and expressed “concerns that the partnership will likely diminish competition, increase concentration of market power, limit choices currently available and potentially raise prices to advertisers for high quality, affordable search advertising.”

The Justice Department is reviewing the four-year deal, which Yahoo has estimated will generate $250 million to $450 million in operating cash flow during its first 12 months, and up to $800 million annually in subsequent years.

When contacted for comment on the ANA’s objections, representatives from Yahoo and Google sent Computerworlda list of URLs to news stories and Congressional testimony of advertisers and advertising agencies that have thrown their support behind the deal.

“Numerous advertisers have recognized that this agreement will help them better match their ads to users’ interests, and that ad prices will continue to be set by competitive auction,” noted Adam Kovacevich, Google’s senior manager of global communication and public affairs, in a statement.  “While some have raised questions about the agreement’s potential impact on ad prices, advertisers care far more about getting a good return on their advertising dollar than they do about buying cheap ads that don’t bring in customers. This agreement will clearly help advertisers reach Yahoo users more efficiently.”

Yahoo added that it is disappointed in the ANA position. “Yahoo remains steadfast in its belief that this deal — in which prices are determined by advertiser demand-driven auctions, and not by collaboration between Yahoo and Google — will strengthen Yahoo!’s competitive position in online advertising and will help to drive a more robust, higher quality Yahoo marketplace for our advertisers,” Kovacevich’s statement went on to note.

In a post on MarketingPilgrim, a blog site that focuses on Internet advertising, Andy Beal said that the sheer volume of advertising dollars spent by ANA members like American Express, Bank of America, American Airlines, Anheuser-Busch, General Motors, Hasbro and Johnson & Johnson might catch the eye of DOJ regulators.

“If you were in charge of approving or denying Google’s search ad deal with Yahoo, would $100 billion influence your decision?” he wrote. “I’m not talking about a check with your name in the ‘PAY TO’ section, but a protest letter from a group of advertisers that, combined, control $100 billion in marketing spend. Would that make you think twice about giving your stamp of approval?”

“Google and Yahoo were prepared for some opposition to the deal — hence agreeing to give regulators 100 days to review the deal — but they probably weren’t expecting such stout opposition,” Beal added.

Paul Glazowski, a blogger at Mashable, went on to note that the ANA letter is the latest in a string of tough news for both Google and Yahoo.

 

“Google is now being hit with increased privacy concerns from European reaches, the US Government, consumer advocates, city and town residents, and various other parties, big and small,” he noted.

And Yahoo has just fended off an attempt by Microsoft to purchase its business, Glazowski added.

“Where will this go?” he wrote. “Perhaps not the way Google and Yahoo originally intended. The extra level of attention given by the ANA” can’t be good news for the Internet firms.

“Keep in mind, it is only weeks until the ‘grace period’ given to inspectors by Google and Yahoo is through,” he noted.

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