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Microsoft, Google spar over Yahoo in Senate

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The Senate Committee on the Judiciary heard testimony for and against Google’s search advertising deal with Yahoo.

As expected, the big legal guns for Google, Microsoft, and Yahoo battled it out before the Committee in Washington today. Google’s David Drummond called the non-exclusive agreement with Yahoo a simple deal, similar to ones it has with WashingtonPost.com and Ask.com. His testimony included citing someone now employed by Microsoft as the result of an acquisition:

“What it will ultimately do is allow us to get broader distribution out of Google’s ad platform. . . . [The partnership] is going to be good news for advertisers.” Matt Greitzer, Vice President of Search Marketing at Avenue A/Razorfish, acquired by Microsoft through its purchase of aQuantive (Bloomberg, 6/20/08)

When Microsoft’s own ad firm – the group within Microsoft that knows online advertising best – confirms the benefits of the agreement for advertisers, we should rest our case right there.

Microsoft’s Brad Smith hammered at what his company sees as antitrust aspects of the Yahoo/Google pairing on search ads:

Google and Yahoo! have not disclosed their agreement to the public. Instead, they have provided selected details in public statements and mandatory filings with the Securities and Exchange Commission. While Google and Yahoo! have suggested that Yahoo! is not obligated to place any Google ads next to Yahoo! search results, they are silent on whether there are limits to the amount of advertising from Google that Yahoo! could substitute for its own.

In fact, there appear to be several incentives for Yahoo! to hand over more, not less, of its advertising sales to Google.

Yahoo!’s President Sue Decker suggested during the company’s June 12 investor call that Yahoo! will rely on whichever search ad(s) will fetch a higher price (i.e., “better monetize”). In essence, therefore, the deal effectively creates a “price floor” (i.e., Google’s price) because there is no incentive for Yahoo! to sell its ad space inventory for less than Google’s platform can realize.

Google continues to contend their arrangement falls outside antitrust oversight, while Microsoft vehemently disagrees.  Meanwhile, federal and state antitrust regulators continue to review the deal for possible problems.

Microsoft, Google spar over Yahoo in Senate
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