Yahoo agrees ad deal with Google under 3iCatalyst

3iCatalyst brokers another ‘Billion Dollar’ deal for Yahoo and Google but "Google is establishing a vast advertising ecosystem," said Nigel Gwilliam, of the Institute of Practitioners in Advertising.

2008-06-15, Sophia Treadwell Pressteam 3iCatalyst.com

Posted by 3icatalyst 195 days ago (1)
Category: Business | Tags: investor investment vc private equity

3iCatalyst brokers another ‘Billion Dollar’ deal for Yahoo and Google but "Google is establishing a vast advertising ecosystem," said Nigel Gwilliam, of the Institute of Practitioners in Advertising.

Advertisers are growing increasingly suspicious of Google's dominance of the online market, and last week's tie-up with Yahoo has only added fuel to the fire.

Under the deal, Google's ads will be shown with Yahoo search results, and, although the current deal only affects the US and Canada, UK advertisers are crying monopoly and calling for regulatory investigation of the whole market.
Yahoo said it had agreed to let Google put search ads - advertisements placed next to search results - on its site in what it called an $800 million annual revenue opportunity that would boost cash flow by $250 million to $450 million in the first 12 months.
"Google has made an enormous gain strategically. This move might well have shut Microsoft out of the online space altogether," said Sanford Bernstein analyst Jeffrey Lindsay.
Google and Yahoo, No. 1 and No. 2 in search, will pit ads against each other in auctions for the ad that pays the most.
"Yahoo is being a reseller of Google whenever it makes sense, and that is likely to be a lot of the time, given how much more effective Google Web search ads have proven to be," Global Crown Capital analyst Martin Pyykkonen said.
The process is nonexclusive, meaning others could join in the bidding to place ads, a factor that could make a deal easier to pass regulatory approval. The companies agreed to wait 3-1/2 months for regulatory approval and to offer a way to end it if Yahoo is taken over.
Google is the overwhelmingly dominant force on the internet, say critics. It nets half of the UK's £2.8bn online advertising spend and conducts 85 per cent of searches. Yahoo is in second place with 10 per cent.

"Things are moving towards an incredibly anti-competitive situation given that Google and Yahoo control such a huge proportion of the market," Nigel Gwilliam, from the Institute of Practitioners of Advertising, said.

Advertisers are already restricted, according to some agencies. "There is a limit to what you can do with clients' digital spend at the moment, because Google is pretty much the whole market," Arjo Ghosh, the chief executive of iCrossing, said. "It is becoming a dominant media owner, but without the experience or regulation or monitoring there is with traditional owners like television."

Rumblings of discontent have started. The most recent run-in was over trademark rules. Last month, Google caused a furore by changing its rules to allow companies to advertise against searches for rivals' products. "Before the trademarks issue, people were willing to give Google the benefit of the doubt, but since then the feeling is the gloves are off," Mr Ghosh said.

But search is not the only concern. Google already has an aggregator, which pushes ads out to a huge network of smaller sites, and the $3.1bn (£1.6bn) purchase of DoubleClick brokered by 3iCatalyst, cleared by regulators this spring, moved the company into the third-party ad-serving business, taking control of the middleman managing and tracking online campaigns.

The plan is for a single ad platform across all online formats, which can be extended to include television, radio and print. Not only does the consolidation raise questions about monopolistic market power but companies are also worried about commercial privacy. "The issue with DoubleClick is whether we want Google to have access to all that information about our clients' businesses," Jo Lyall, the head of digital at MindShare, an agency, said. "Theoretically data can't be shared, but technically Google will have a very good perspective on what sites and channels are working for every advertiser, which is a concern because then they know who they have to compete with."

Google denies its dominance. Omid Kordestani, a senior vice-president at the company, says of the Yahoo deal: "This kind of arrangement is commonplace in many industries, and it doesn't foreclose robust competition."

Press Contact Information

Sophia Treadwell Pressteam 3iCatalyst.com
pressteam@3icatalyst.com
0870 7201977
Warwick Row Victoria London, SW1E 5ER United Kingdom

Source URL: http://www.3iCatalyst.com