Yahoo and Google Partnership

Nov 4th, 2008No Comments

Google and Yahoo have offered to narrow the scope of a planned advertising partnership in a last-minute effort to win the approval of the Justice Department, which is scrutinizing the deal for its effect on competition, a person briefed on the revised plan said on Monday.

Advertising deal calls for Google to place ads next to some Web search results on Yahoo, lifting Yahoo’s revenue.

Under the revised terms, the deal would be shortened to 2 years, from as many as 10, said the person, who agreed to speak only on the condition of anonymity because the discussions remained confidential.

In addition, the amount that Yahoo could earn from ads placed by Google would be capped at 25 percent of Yahoo’s search advertising revenue, the person said. Previously, Yahoo had the discretion to decide how much of its search ads to turn over to Google.

Google and Yahoo submitted the new proposal to the Justice Department over the weekend. It is not clear whether the limitations will be enough to satisfy antitrust investigators, who have raised objections to the planned partnership.

Representatives for Yahoo and Google declined to comment on the new proposal, but said that discussions with the Justice Department were continuing. Gina Talamona, a department spokeswoman, said the matter was pending but declined to comment further.

The proposed limits on the partnership, if accepted by regulators, would most likely reduce the financial benefits of the deal for Yahoo, which has been struggling to accelerate its growth in the wake of failed merger talks with Microsoft. The company has said it hopes to receive $250 million to $450 million in additional operating cash flow from the agreement in its first year.

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