04 November 2008

Google and Yahoo! modify terms of advertising deal

Google and Yahoo have revised their planned advertising deal in a bid to try to win the approval of the US Justice Department. The changes to the proposal come as regulators express concerns over the deal and the effect it would have on advertising competition.

The original deal proposed a partnership between Google and Yahoo! over paid search, which would see Google Adsense ads placed next to search results on Yahoo!. The deal would boost revenue for Yahoo! and strengthen Google's already powerful dominance in the search advertising market.

In a last ditch attempt to reach an agreement, the companies have made changes to the proposal, including shortening the partnership from 10 years to just two years.

The percentage of search revenue that Yahoo can collect from Google has also been capped at no more than 25 per cent. The previous deal had given Yahoo the power to determine the number and placement of the results provided by Google.

The new proposal also gives Google advertisers the opportunity to opt out of being placed on Yahoo.

Under the initial deal, Yahoo had hoped to receive $800 million of revenue within the first year. This revised agreement could significantly reduce the financial benefits for Yahoo to around $250 million to $450 million.

It is expected that a decision will be reached this week, which could result in a last-minute agreement sealing the deal between the search engines. However there is also a chance that the Justice Department may file a suit blocking the deal, or the companies may decide to walk away from the agreement entirely.

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