How Low Will They Go? Google/Yahoo Discuss Deal Limits with DOJ

With all the negative attention on their search ads deal, it would be a surprise to learn that Google and Yahoo are not in active talks with the Justice Department. They are of course, and the Wall Street Journal has delivered some additional details on those negotiations, courtesy of “lawyers close to the effort.”

According to the Journal’s sources, the DOJ is seeking a handful of general concessions such as a cap on the ads Yahoo can outsource to Google and a reporting system to monitor those caps. No details are provided on what the ceiling would be as a percentage of Yahoo’s total ad volume, and frankly, we may never know if the negotiations are fruitful. The important question for Yahoo is whether it can still deliver the upside it promised investors back in June, when it called the deal an “$800 million annual revenue opportunity.”

Prosecutors are also looking for assurances from Yahoo that it will keep innovating on search ad monetization. That’s a little tough to measure, but should still be a slam-dunk for Yahoo, which really does still want to be a contender in this area. And it may advance that goal through the deal, by observing the ads Google matches to its queries.

A final point of interest: WSJ’s sources say DOJ investigators continue to put together an anti-trust lawsuit to prevent the arrangement — an expected measure that may be partly a negotiating tactic.

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