Google, Yahoo delay ad deal over DOJ investigation

by Nancy Gohring

October 5, 2008 —

Google and Yahoo will further delay their
controversial search-advertising deal in the face of an ongoing investigation by
the U.S. Department of Justice.

"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," Google said on Friday. "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 agreement, announced just as Microsoft's acquisition bid
for Yahoo was falling apart, will let Yahoo run Google ads with Yahoo's search
results and on some Yahoo sites in the U.S. and Canada. Critics have said the
deal will hurt competition and lead to higher prices, since Google and Yahoo
hold the top two market-share positions in search.

Google, which has
recently stepped up its public statements in support of the deal, argues that
prices will remain fair because advertisers pay based on an auction system.
"Neither Google nor Yahoo set ad prices," wrote Tim Armstrong, president of
advertising and commerce for Google in North America, in a recent blog
post. "Ads are priced by an auction where an advertiser only bids what an ad
is worth to them."

Google recently launched a Web site arguing
why it thinks the deal would be good for advertisers.

The DOJ has
confirmed that it is conducting an antitrust investigation into the partnership.

IDG News Service