Marketers Formally Object to Yahoo-Google Pact

In a plea to the U.S. Department of Justice, the Association of National Advertisers has voiced its opposition to Yahoo’s plan to outsource some search ads to rival Google.

The group, which represents the interests of approximately 400 major advertisers, said it has conducted an analysis of the looming tie-up between Google and Yahoo. Its conclusion, based on interviews with members, its board, Google and Yahoo: The deal is rotten for marketers.

“…The partnership will likely diminish competition, increase concentration of market power, limit choices currently available and potentially raise prices to advertisers for high quality, affordable search advertising,” the association said in a statement about the letter.

The ANA letter was addressed to Thomas Barnett, assistant attorney general, U.S. Department of Justice. The group declined to provide a copy of the letter and neither the ANA or Department of Justice were immediately available to comment.

Barring intervention by the DoJ, Yahoo and Google will flip the switch in October. When the companies paired up in June, they said they’d delay implementation for up to three and a half months to allow a U.S. Justice Department review, though such a postponement isn’t required by law.

“We are going to move forward,” Google CEO Eric Schmidt told the Seattle Times late last month. “We are in the process of talking to the government. They’ve not indicated one way or the other how they’re dealing with us.”

While the DoJ may be mum on the pact, others in government have expressed concern. In a July 15 hearing, a Senate Judiciary Committee wondered if the companies’ relationship would remove an important check on Google’s dominance of the search ads marketplace.

Yahoo and Google have all but admitted the deal would raise prices for advertisers, though they haven’t used those words exactly. In the words of Yahoo President Sue Decker, carrying Google’s ads will help the company “deliver financial value to stockholders from search monetization.” Advertisers have pointed out better monetization in this case means pricier keywords; they expect Yahoo will switch out its own relatively cheap ads when Google can sell a given search keyword or phrase at a premium.

The question is, are higher prices enough to make the DoJ act? Yahoo has been under pressure to improve performance, especially in the wake of its damaging merger negotiations with Microsoft. The matter may boil down to whether regulators decide Yahoo’s continued health is more important than keeping costs low for Internet advertisers.

Google’s Schmidt appears unconcerned: “We always worry a little bit, but we think our arguments are pretty strong,” he told the Seattle Times in August.

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