Newspapers Object to Yahoo-Google Advertising Deal

Posted by: Jennifer L. Schenker on September 15

Google, which is already facing U.S. Department of Justice scrutiny of its advertising partnership with Yahoo!, came under fire Sept. 15 from the Paris-based World Association of Newspapers, which argues that an agreement between the two Internet giants “will have a significant and adverse effect on all newspaper publishers worldwide.” The group, which represents 77 national newspaper associations and 18,000 newspapers worldwide, asked competition authorities in Europe and Canada to step in and block the deal.

The association’s complaint comes as regulators across the U.S. are stepping up their scrutiny of Google's role in the market for online advertising. In addition to the Justice Department’s probe, attorneys general in at least 11 states are conducting their own investigations to determine whether the deal gives Google too much control over the online advertising market.

The European Commission said September 15 that it is examing whether the Google-Yahoo advertising agreement is violating European laws governing restrictive business practices. The competition directorate's track record shows that it is not shy about going after U.S. companies if it believes there is anti-competitive conduct which impacts Europe and European companies.

The World Association of Newspapers said it has complained to the anti-trust division of the U.S. Department of Justice as well as the European Commission’s Competition Directorate and the Competition Bureau of Canada. In response, Google’s Brussels office issued a statement September 15 which says that its agreement with Yahoo “is limited in scope to Yahoo's U.S. and Canadian websites, and it will not have any significant effect on Europe."

The association argues a tie-up between Google and Yahoo would have a significant effect on European newspaper publishers. “First, many of our European members are active in North America and will be directly harmed by any anti-competitive conduct there,” the group said in its letter to European Competition Director Cecilio Madero. “Second we believe the deal will result in reduced incentives for Yahoo to compete against Google even in Europe, as Yahoo reportedly expects to earn hundreds of millions annually under the agreement.”

Also, the group's letter maintains, because Google and Yahoo together control over 95% of advertisers search advertising spending in Europe, “the two companies could easily set the conditions for competition in the EU if they choose to do so.”

Newspapers have lots of axes to grind with Google. The industry association points out that of the $48 billion in online advertising revenue that Google has amassed since 2001, less than one third of that has been returned to online publishers and a much smaller fraction to the news and content generation industries. Some publishers even go as far as saying that Google’s grip on online advertising poses a threat to the future of independent news organizations. The industry association says that “never in the history of newspaper publishing has a single, commercial entity threaten to exert this much control over the destiny of the press.”

What is the worry? Most of WAN’s members depend on Google, and to a lesser extent Yahoo, for a significant portion of their online advertising revenue and rely on each company’s respective search engines to drive traffic to their websites. To date, argues WAN, competition between Yahoo and Google has provided a necessary check to any potential market abuses.

In the industry group’s view the proposed advertising deal between Google and Yahoo would severely weaken that competition, resulting in less revenues and higher fees for newspapers. It argues that if Yahoo is less of a threat, it will solidify Google’s dominance of the search engine business at the same time that Google is expanding its own content businesses, such as Knol. The fear is that Google will have an increasing incentive to favor its own and that of its chosen partners’ sites and to divert users away from competing sites. The theory is that newspapers will then become even more reliant on paid search ads to attract readers – ads that could be even more expensive as a result of the deal.

The group said it is also upset that Google has been dismissive of the Automated Content Access Protocol, a joint initiative spearheaded by the World Association of Newspapers, the International Publishers Association, the European Publishers Council and several other organizations to develop a web-crawling technology that would allow online publishers to retain greater control over the content they place online.

Other critics of Google and Yahoo’s advertising agreement are Microsoft, which is still hoping to get Yahoo back to the table, and advertisers, who fear that not only will Google set higher prices for search ads but it will also reduce the share of revenue it gives to partner Web sites that show its search-related ads on their pages.