Yahoo, Google Prepare to Justify Their Deal in D.C.

  |  June 19, 2008   |  Comments

Democrat and Republican Congressmen express concerns as Yang heads to Capitol Hill.

In a June 12 blog entry, Omid Kordestani, Google's senior VP of global sales and business development, predicted legislators would have concerns about his company's decision to allow Yahoo! access to AdSense for search and content advertising.

Google execs, he wrote, "have been in contact with regulators about this arrangement, and we expect to work closely with them to answer their questions about the transaction."

Let the answering begin.

U.S. Sen. Herb Kohl, a Wisconsin Democrat, was the first to weigh-in. The day after the Yahoo/Google announcement, Kohl -- who presides over Senate's antitrust panel -- said the deal would be carefully reviewed by him and his colleagues.

Then, this week, Republican U.S. Rep. Joe Barton of Texas fired off to Yahoo a long list of questions and concerns. Barton's strongly-worded, three-page letter was addressed to Yahoo CEO Jerry Yang and said the partnership raises worries, "not only about the effect of the partnership on the online search advertising market, but also about the protections for Yahoo user data."

Barton pointed to the consolidation within the online ad industry and he said he's "concerned about how this collaboration will impact competition" in the industry given that, when one adds in Microsoft, there are only three real players. The full letter is available on the House of Representatives Web site.

Meanwhile Yahoo CEO Jerry Yang headed to Washington on Thursday and met privately with congressional leaders, according to reports. Handshakes and face-time won't be enough to pacify Barton, it appears. In his letter, he specifically told Yang he wants "written responses" to his eight very detailed questions about the Google deal.

Among those queries: Which company first approached the other? When did that happen? Who was involved?

Clearly, the congressman wants more than superficial answers. His letter cites "recently unsealed" documents suggesting that, only five months ago, some Yahoo officials expressed concern that an arrangement with Google "would result in a monopoly in the online search market." Again, Barton wants names and titles of these people and he also wants to know if their concerns were shared with the Yahoo board.

Gerry Bavaro, VP of client services at search marketing company Didit, said Congress may fear Yahoo will allow its partnership with Google to expand until the latter has an effective monopoly on search ads.

"The fear Congress has is, what's going to stop Yahoo from taking the search side of the business and having the syndication to Google grow so Yahoo can focus on the display side? There is a fear that this can become a bigger partnership on many different fronts," Bavaro said.

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