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International: World Association of Newspapers opposes Yahoo-Google ad deal

16-September-2008
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International: World Association of Newspapers opposes Yahoo-Google ad deal

The World Association of Newspapers (WAN) has asked competition authorities in Europe and North America to block an advertising agreement between Google and Yahoo on anti-competitive grounds, stating that the deal would have a negative impact on the advertising revenues that the search giants provided to newspaper and other websites, and on the cost of paid search advertising.

WAN, which represents 77 national newspaper associations and 18,000 newspapers worldwide, has called on the Antitrust Division of the United States Department of Justice, the European Commission’s Competition Directorate, and the Competition Bureau of Canada to examine the impact of the agreement and to block the deal.

Gavin O’Reilly, President of the Paris-based WAN, in letters to directors of three leading agencies, stated, “The Association believes that the competition that currently exists between Google and Yahoo is absolutely essential to ensuring that the members receive competitive returns for online advertising on their sites, and for obtaining competitive prices when they purchase paid search advertising.”

He further said, “In our view, the proposed advertising deal between Google and Yahoo would seriously weaken that competition, resulting in less revenues and higher prices for our members. WAN is also concerned that this deal would give Google unwarranted market power over important segments of online advertising.”

As pr the deal between the search engine companies, Yahoo can run ads supplied by Google alongside Yahoo’s own search results. The deal would provide millions of dollars in revenue to Yahoo and strengthen Google’s dominance over the search engine advertising market.

Google and Yahoo were the two suppliers of content ads and syndicated search ads to online news sites, and they competed intensely for that business, WAN said, adding, this competition forced each company to offer the best possible terms and helpd ensure that newspapers earned a fair market return for the right to display ads and search boxes on their sites.

The proposed deal would weaken Yahoo as a competitor for these deals, insisted WAN. Advertisers would increasingly migrate to Google since they would see diminishing price advantages to advertising through Yahoo. Yahoo would then have fewer of its own ads to serve and, therefore, less ability to offer a better deal than Google. This problem would grow over time because Google has refused to allow Yahoo to show Google ads on the websites of new publishing partners it acquires after the deal is finalised. In other words, Google has imposed a condition that impedes one of Yahoo’s last remaining opportunities to compete with Google. What this means for newspapers is that Yahoo’s bids for their ad business would almost certainly be lower than what they are today. The two companies submitted the agreement to a voluntary 100-day review process by the US Department of Justice.

Although Google and Yahoo have maintained that the deal was limited to North America, WAN believes it would have a significant effect on European newspaper publishers and warrants investigation by the European Commission.

“First, many of our European members are active in North America and will be directly harmed by any anti-competitive conduct there. Second, we believe the deal will result in reduced incentives for Yahoo to compete against Google even in Europe, as Yahoo reportedly expects to earn hundreds of millions annually under the agreement. Also, because Google and Yahoo together control over 95 per cent of advertisers’ search advertising spending in Europe, the two companies could easily set the conditions for competition in the EU if they chose to do so,” WAN said in its letter to European Competition Director Cecilio Madero.

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