Kara Swisher

Recent Posts by Kara Swisher

Yahoogle Delayed: Online Ad Partnership Being Scrutinized Further

Yahoo and Google have agreed to delay their online search advertising partnership to give the Justice Department more time to evaluate the deal.

A Yahoo spokesman confirmed the move in a statement: “The companies have agreed to a brief delay in implementing this agreement to continue our ongoing discussions with the Department of Justice. We have had discussions with regulators and look forward to responding to their questions about this agreement.”

A Google spokesman also added: “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 delay could impact Yahoo’s share price on Monday, given the deal for Google to serve some of its search ads promised to give Yahoo (YHOO) hundreds of millions of dollars in additional revenue.

Still, the pair had few options of late but to cooperate fully with regulators.

Although Google (GOOG) execs have been especially adamant that the arrangement was going forward no matter what, the delay is now not as surprising, given the increasing opposition to the deal involving the No. 1 and No. 2 online search leaders in recent weeks.

So much so, that, according to several sources with knowledge of the situation, staffers at the Justice Department had recommended to their superiors that the deal be investigated further and even blocked in court.

Top Google execs have been in Washington, D.C. over the last week, seeking to change regulators’ minds, sources said, including offering up more proof that the deal would not result in a Google search ad monopoly and necessarily raise online ad prices.

But the problem has been that more critics have been joining the just-say-no-to-Yahoogle bandwagon–questioning the controversial ad deal for Yahoo to outsource some of its search ads to Google and its aggressive, damn-the-torpedoes approach to pushing the deal forward.

Just a few weeks ago, Google CEO Eric Schmidt told reporters the deal would not be delayed by Justice Department mulling. “Time is money in our business,” he said.

That might be, but time now apparently waits for regulators.

The partnership was set to start up around mid-October and promised to give the much-suffering Yahoo a huge boost in revenues.

Of course, the deal has been much lobbied against aggressively by Microsoft (MSFT), especially since Yahoo used it as a way to escape the software giant’s takeover clutches.

Nonetheless, critics like Microsoft have a lot of ammo, especially because Yahoo and Google together will claim over 80 percent of the search market.

That has caused a big outcry among advertisers and publishers to prevent the top two players from partnering at all.

BoomTown has been one of those objecting to the deal too.

In a post recently, I wrote: “Because while Google displays none of the bullying tactics of Microsoft in its glory days–think of it more like a giant that could accidentally squash all us little people with its big dumb feet–the worries about it amassing too much power are well-founded.”

What’s next is anyone’s guess. Google and Yahoo could agree to certain parameters in the deal, in order to assuage critics, or they could fight any regulatory action.

And, of course, they could abandon the deal, a move that most agree would hurt Yahoo more than Google–whose search market share has been ever-growing, even as Yahoo’s and Microsoft’s has declined.

Please see this disclosure related to me and Google.

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