labels: Microsoft, Yahoo!, Google
Yahoo, Microsoft look for other media partners; regulator investigates Yahoo-Google ad deal news
03 July 2008

There have been quite a few developments on the Internet search front after Yahoo rebuffed Microsoft's takeover offer and added salt to its pains by tying up with arch rival Google in an advertising deal.

For one, Microsoft and Yahoo are mulling separate associations with potential media partners, while federal investigators have confirmed their keen interest in the Yahoo-Google deal. (See: Yahoo strikes $800-million ad deal with Google, ends talks with Microsoft)

Microsoft is reportedly talking about alternative deals with Time Warner Inc, which owns AOL, and Rupert Murdoch's News Corp, parent of social networking site MySpace, although negotiations remain in preliminary stages.

Meanwhile, talks have continued for months between Yahoo and Time Warner over a potential merger of AOL with Yahoo to create a more formidable advertising and media player, but they are no closer to a deal, say sources.

Shares of Yahoo jumped as much as 9 per cent yesterday after the Wall Street Journal reported that Microsoft, positioning for a new run for Yahoo's search business, had in recent days approached media companies to join together on a deal that would effectively lead to Yahoo's breakup.

In a separate but not entirely unrelated development, the US Justice Department yesterday confirmed that it was conducting a formal investigation into the Yahoo-Google advertising tie-up. As part of the probe, the government is sending "civil investigative demands" to an array of internet, advertising, and media companies that could be affected by the deal, sources say.

This is not unexpected as several companies, most notably Microsoft, had expressed their opposition to the deal immediately after it materialized and had expressed their willingness to lobby regulators and lawmakers to investigate the same. (See: Microsoft opposes Yahoo-Google deal, reveals another rejected stake plus search offer)

Now, even though Google argues that the agreement is not a merger and it covers only a small part of Yahoo's search business, besides being non-exclusive as Yahoo is free to seek other partners, competitors contend that any deal betweenthe two would ''increase prices for advertisers and start to consolidate more than 90 per cent of the search advertising market in Google's hands''.

The deal was carefully crafted to not cause anti-competition concern, says Dana Wagner, Google's competition counsel. "The [Justice Dept.] has never blocked a non-exclusive deal," Wagner says. However, the federal authorities may not be quite so cooperative if its latest moves are any indication.


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Yahoo, Microsoft look for other media partners; regulator investigates Yahoo-Google ad deal