(Adds Google comment, analyst, background, byline)
By Diane Bartz
WASHINGTON Oct 3 Google Inc (GOOG.O) and Yahoo
Inc (YHOO.O) have decided to delay implementing a controversial
search advertising partnership, Yahoo said on Friday.
"The companies have agreed to a brief delay in implementing
this agreement to continue our ongoing discussions with the
(U.S.) Department of Justice," Yahoo said in a statement. "We
have had discussions with regulators and look forward to
responding to their questions about this agreement."
Google issued a similar statement.
"When we announced our advertising agreement with Yahoo in
June we agreed to delay its implementation until October to
give regulators time to look at the details. As we are still in
conversation with the Department of Justice we have agreed to a
brief delay in implementing the agreement while those
discussions continue," the company said.
The delay was expected to last less than a month, a source
familiar with the discussions on the issue told Reuters. "We're
still looking at the time frame of October," the source said.
The deal, which allows Google to sell advertising for some
of Yahoo's online advertising space, is unpopular with
advertisers who fear higher prices. Google's web-search market
share widened to 63 percent in August, while Yahoo dropped to
19.6 percent and Microsoft Corp (MSFT.O) slipped to 8.3
percent, according to comScore Inc.
Bob Liodice, president and CEO of the Association of
National Advertisers, said his organization was opposed to the
pact. "We're gratified that Google and Yahoo are delaying," he
Google uses an algorithm that aims to match consumers with
what it says are the most appropriate ads, a formula some
advertisers find mysterious and bothersome.
The deal announced in June to share advertising was widely
seen as an effort to help fend off Microsoft's efforts to
acquire Yahoo, by bringing Yahoo an additional $800 million in
An antitrust lawyer, who regularly brings mergers to the
Justice Department, said that the delay was probably not a good
sign for Google and Yahoo.
"It means that they were not going to get a clean bill of
health in time, and perhaps it's much worse than that. They
don't want to go forward and be told that there's potentially a
very serious problem there," said the lawyer.
There had been previously been signs that the planned
partnership was running into trouble with the Justice
Department, in particular reports that the agency had brought
on board top litigator Sandy Litvack to work on the deal.
Litvack was the department's antitrust chief under former
U.S. President Jimmy Carter and Walt Disney Co's (DIS.N) former
Google has argued the tie-up means Google and Yahoo could
work together to improve the chances that consumers will be
more likely to get ads for products they will want to buy --
thus giving advertisers more bang for their buck. It has also
said that since it sells its advertisements by auction that it
has little control over prices.
(Reporting by Diane Bartz; Editing by Tim Dobbyn, Leslie