Russia blocks Google online advertising acquisition

By , IDG News Service |  Business, Google, online advertising

Russian regulators will not let Google buy a local online advertising company, halting a $140 million deal agreed to in July.

Google planned to acquire Zao Begun, which has a search and contextual video and text advertising business. Begun is owned by Rambler Media, a Russian company that own various Web sites and runs a search engine.

Google said it is reviewing the decision of Russia's Federal Antimonopoly Service (FAS) and hasn't decided how to react.

"We are very disappointed to hear that FAS has come to this decision," Google said in a statement. "We strongly believe that this acquisition will enable us to significantly improve opportunities for Russian users, advertisers and publishers as well as the entire industry."

Google's plans to grow its online advertising business, which comprises nearly all of the company's revenue, has run into other obstacles with regulators.

The U.S. Department of Justice is investigating a plan for Yahoo to show Google search ads. That deal formed as Yahoo was under intense pressure earlier this year as Microsoft tried to acquire the company.

Yahoo and Google planned to start the program this month, but it has been delayed pending the DOJ review. Critics say it could drive up the costs of advertising and also gives the two companies too much control over the online advertising market. Google has said ads are purchased by auction, and neither company sets prices.

The rejection of the deal in Russia underscores the difficulty Google is having in some markets. While it dominates search in Western countries, Google faces strong competition from local search engines in places such as South Korea, China and Russia.

Google picked a strong partner in Russia: Begun runs a network with 40,000 advertisers covering 143,000 Russian-language Web sites. When the deal was announced, Rambler also signed an additional agreement to use Google's AdSense technology on its main portal.

Efforts to reach Rambler Media were unsuccessful.

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