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Report: Google, Yahoo make concessions on ad deal

Tue, 11/04/2008 - 7:05am
Michael Liedtke, AP Technology Writer

SAN FRANCISCO (AP) – Google Inc. and Yahoo Inc. have reportedly submitted a list of concessions that would deflate their proposed Internet advertising partnership to appease antitrust regulators threatening to block the alliance.

The companies offered their revisions to the U.S. Justice Department during the weekend, according to a story posted Monday on The Wall Street Journal's Web site.

Citing people familiar with the matter, the Journal said Google and Yahoo are now willing to limit the amount of revenue generated from the partnership and shorten the deal's duration. Google's advertising customers would also be given the option to not have their commercials appear on Yahoo's Web site.

Under the new plan, Yahoo would be limited to getting no more than 25 percent of its search advertising revenue from Google and their partnership would expire after two years. The original contract signed in June spanned 10 years and didn't have any restrictions on how frequently Yahoo could draw upon Google's technology for displaying ads alongside its search results.

Yahoo had estimated Google's system would enable it to boost its revenue by $800 million annually, but the restrictions would cut that amount in half.

Putting a 25 percent limit on its revenue from Google's system would mean limit Yahoo's take to about $400 million annually, based on Yahoo's search advertising sales during the past four quarters.

Representatives from Google and Yahoo declined to comment on the Journal's report, but confirmed the companies remain in talks with the Justice Department in hopes of winning clearance to join forces.

Antitrust regulators have been taking a hard look at Yahoo's proposed reliance on Google's technology because the two companies combined control more than 80 percent of the U.S. search advertising market.

Microsoft Corp. and the Association of National Advertisers, among others, have argued the arrangement would enable Google to gradually increase advertising prices and exert more control over the flow of e-commerce.

The Justice Department signaled it was considering a legal challenge to the deal in September when it hired veteran antitrust lawyer Sanford Litvack to review the case.

Google had vowed to launch the Yahoo partnership by mid-October, but backed off to avoid a legal battle that would have focused on the market power that Google has been accumulating while running the Internet's most profitable advertising network.

Analysts have argued that it might not make much sense for Yahoo and Google to work together if they are forced to make too many concessions.

But Yahoo is under intense pressure to do anything possible to boost its sagging profits after inflaming its shareholders by rejecting a $47.5 billion takeover offer from Microsoft six months ago. Microsoft withdrew its $33-per-share offer after Yahoo co-founder Jerry Yang held out for more money.

Yahoo shares closed Monday at $12.75, down 7 cents.

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• Report: Google, Yahoo make concessions on ad deal

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