Google-Yahoo Ad Deal Goes Before Congress

Google claims the deal with Yahoo will not increase the company's search traffic share, though Microsoft warns of anticompetitive behavior. The Google-Yahoo deal also faces scrutingy from the DOJ.

Expect Google and Microsoft to exchange public insults July 15 when a Senate subcommittee examines Google's and Yahoo's proposed advertising deal, which is also under a voluntary antitrust review by the Department of Justice and the subject of growing interest by the attorneys general in a number of states.

The hearing will place all the principal players at the same table to face questions from lawmakers about the partnership between the nation's top two online search engines. Microsoft, already a distant number three in search and not without its own interest in Yahoo, is opposed to the deal.

Microsoft general counsel Brad Smith is expected to tell the panel the deal will "make Google bigger than any newspaper chain or any television network and provide Google the largest concentration of advertising control in history," according to testimony leaked to MarketWatch.

A combined Google-Yahoo search would control more than 80 percent of the search market.

However, Google will counter that the deal "will not increase Google's share of search traffic." Drummond also volunteers that a combination of Microsoft and Yahoo would "remove a competitor to the playing field" and warns lawmakers of Microsoft's "long history of abusing and extending its dominant positions through anticompetitive practices."

Sen. Herbert Kohl, chairman of the Senate Antitrust Subcommittee, promised hearings shortly after the deal was announced. "We will closely examine the joint venture between Google and Yahoo," Kohl said. "This collaboration between two technology giants and direct competitors for Internet advertising and search services raises important competition concerns."

Google and Yahoo announced June 12 they had reached a nonexclusive deal to run Google's search and contextual advertising technology through its AdSense for Search and AdSense for Content advertising programs on the Yahoo search engine. Yahoo expects to generate between $250 million and $450 million in operating cash flow during the first 12 months of the four-year deal.

Yahoo CEO Jerry Yang met with Kohl and other congressional leaders June 18. According to Yahoo spokesperson Tracy Schmaler, "we structured the agreement with Google so that Yahoo will not transfer any personally identifiable information to Google without user consent. We have also designed this agreement so that both companies have stayed within each of their existing privacy and data policies, such as Yahoo's policy regarding logs anonymization after 13 months."