Yahoo-Google ad pact raises antitrust eyebrows

sfgate_get_fprefs();

(06-12) 19:54 PDT --
Yahoo Inc. ended negotiation with Microsoft Corp. on Thursday and teamed with competing Google Inc. inch an advertisement partnership that falls in the two greatest Internet hunt engines - and raises antimonopoly concerns.

Under the agreement, Google will provide some of the advertisement on Yahoo's hunt engine and other properties, giving Yokel an estimated extract of up to $800 million in further yearly gross to support its slumping business. Yokel bes after to go on to sell its ain hunt advertisements but will expose them only when they earn more than gross than those sold by its new partner.

Jerry Yang, Yahoo's head executive, called the Google understanding a good move for his company and shareholders. He alluded to Yahoo's five-month face-off with Microsoft, which proposed to purchase the Sunnyvale Web portal for $47.5 billion and then to simply get Yahoo's hunt concern - an thought that Yahoo's board rejected Thursday.

"Clearly, it is clip to travel on, and we believe that this understanding with Google makes so by strengthening our competitiveness," Yang said.

For Google, the understanding is a major triumph because adding a spouse the size of Yokel will add substantially to its already formidable fiscal might. At the same time, it covers a blow to Microsoft, which began its wooing of Yokel hoping to win more than grip online by gaining control of Yahoo's advertisement business. In the end, Microsoft succeeded only in pushing Yokel into the encompass of common challenger Google, of Mountain View.

It's unclear what impact the Yahoo-Google understanding will have got on an attempt by billionaire investor Carl Icahn to throw out Yahoo's board at the company's yearly stockholder meeting Aug. 1. He's been pressuring Yokel to O.K. a coup d'etat by Microsoft and is less enthusiastic about a Google deal.

Colin Gillis, an analyst with Canaccord Adams, said that Icahn's opportunities of installing his ain slate of managers is less without Microsoft in the mix. Icahn didn't go back a telephone phone call seeking comment.

"This board's authorization is to present a smooth, friendly dealing to Microsoft," Gillis said. "Without a buyer, it's unlikely that he's going to acquire the ballots needed to acquire his board in."

If Microsoft makes alteration its head and win with a coup d'etat of Yokel within 24 months, it would have got to pay Google $250 million to stop its new advertisement partnership. However, the amount could be reduced depending on Google's grosses from the agreement.

A trade between Google, the No. One hunt engine, and Yahoo, a distant No. 2, raises serious antimonopoly concerns. Attorneys observing from the outside anticipate the trade to acquire a tough regulating reappraisal by the Department of Justice.

"It's a marketplace that impacts an atrocious batch of both consumers and vendors," said Saint David Turetsky, co-chair of the antimonopoly grouping at the law house John Dewey LeBoeuf and a former helper lawyer full general for antimonopoly issues. "It's going to acquire a very, very careful look."

Consumer groups, ranging from those focused on the privateness effects to some with stopping point neckties to Microsoft, already are agitating against the deal. Respective congressional commissions are expected to look into the topic, including the Senate's antimonopoly subcommittee, whose chairman, Herb Kohl, D-Wis., said in a statement: "This coaction between two engineering giants and direct rivals for Internet advertisement and hunt services raises of import competition concerns."

Eric Schmidt, Google's head executive, said that the partnership was carefully structured to avoid regulating problems, emphasizing that it is nonexclusive. Yokel could beg other hunt companies to lend advertisements in improver to Google.

The new spouses said they will wait 3 1/2 calendar months to implement the deal, even though they aren't required to make so under antimonopoly law.

A treaty between Yokel and Google had been widely expected in the aftermath of a two-week ad diagnostic test the two companies tried in April that both described as successful. Google's advertisements bring forth up 70 percentage more gross per chink than Yahoo's, according to Yahoo.

Yahoo declined to state what per centum of its advertisements will be outsourced to Google. But Sue Decker, Yahoo's president, indicated that Google makes particularly well placing advertisements next to consequences of relatively indeterminate hunt queries.

Only Yahoo's U.S. and Canadian places are included in the agreement.

The news spooked Yokel investors, who sent shares falling $2.63, or 10 percent, to $23.52 on Thursday. Microsoft's shares jumped $1.12, or 4.1 percent, to $28.24, based on investor sentiment that the company was better off without Yahoo. What's the trade

Yahoo have agreed to outsource some of its hunt engine advertisements to Google:

-- Ads from both Yokel and Google will look adjacent to Yahoo's hunt results.

-- The trade with Google will hike Yahoo's yearly gross by at least $800 million.

-- Execution is expected by the end of September.

-- The Department of Justice will carry on an antimonopoly review.

Source: Yokel Inc.

E-mail Jules Verne Kopytoff at .