Google: Yahoo! Deal Not Bad For Competition

    September 19, 2008
    Chris Crum

The other day, Eric Schmidt blamed Microsoft for fanning the flames of controversy over Google’s proposed advertising deal with Yahoo!. He did also note, however, that Google had probably failed to explain the deal well enough, and that this had contributed to said controversy as well.

Tim ArmstrongWell, Tim Armstrong on the Google Public Policy Blog has taken the initiative and explained a little about just what the Google-Yahoo! deal will entail. Yesterday, he answered questions about ad pricing, and today he talked about competition, which is really the heart of the controversy, and the reason why the whole deal is under investigation by the U.S. Department of Justice.

Armstrong says that the deal is not bad for competition, contrary to popular belief. He compares the deal to Toyota providing hybrid technology to competitor General Motors. Yahoo! plans to reinvest the money it makes from the deal into improving its own services, and Yahoo! will still have the freedom to make similar deals with other companies, should it choose to do so.

Yahoo! will still have its own ads in addition to Google’s, but the question has come up of why anyone would want to keep advertising with Yahoo!’s service. The answer to that is Yahoo! will be dictating when it wants to use Google ads. "They have stated that their plan is [to] show them primarily on pages where few or no ads currently appear," says Armstrong. "The only way for an advertiser to guarantee placement for their ads on Yahoo! is to advertise through the Yahoo! platform itself."

Armstrong also assures everyone that Google and Yahoo! will not share personally identifiable user data, which should alleviate potential privacy concerns. As for the notion that the Google-Yahoo! deal will control 90% of the search advertising market, Armstrong says it’s "about expanding the pie, not dividing it differently."

Schmidt said at a Media roundtable the other day that Google expected all of the scrutiny the deal is attracted, and that the company was not very worried about it because they have been "playing by the rules." As of now, Google still plans to go forward with the deal next month, provided it is not blocked by the government.