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Google re-engineers deal

Google re-engineers deal

Responding to growing anti-trust concerns, internet search king Google has dramatically reshaped its proposed online advertising tie-up with Yahoo! in a bid to save the controversial deal.

Responding to growing anti-trust concerns, internet search king Google has dramatically reshaped its proposed online advertising tie-up with

Yahoo! in a bid to save the controversial deal.

According to widespread reports, Google will now pursue just a

two-year partnership with Yahoo!, down from its original plans for a

10-year agreement. The new proposal also caps the amount of money

Yahoo! can make from the deal at 25 per cent of its total search

revenue.

The modifications come as US and European competition regulators

examine the deal and media and advertising industry groups express

concerns over the plan.

They also come amid rampant speculation that the deal could collapse

under the weight of the probes.

Yesterday Google and Yahoo! declined to comment on any specific

changes that might have been made to their proposed partnership, which

was announced earlier this year as Yahoo! fended off a $US47.5 billion

takeover bid from Microsoft.

"We have been working with the Department of Justice regarding our

agreement with Google and those discussions are ongoing," Yahoo! said

in a statement.

Similarly, Google said in a statement it was "continuing to have

co-operative discussions with the Department of Justice about this

arrangement and agreed to a brief delay in implementing the agreement

while those discussions continue".

It is unclear when Google and Yahoo! will learn if the DoJ or European

Commission will oppose the partnership, which Google's chief executive

Eric Schmidt has already said could be abandoned.

Google has argued that the agreement does not threaten competition

because it is non-exclusive and focused on North America.

But advertising and media industry groups, as well as Microsoft, have

argued that the tie-up would give Google influence over the vast

majority of the US online search ad market and could also affect

regions outside North America.

The UK's Institute of Practitioners in Advertising yesterday added its

voice to the chorus building against the partnership.

"On behalf of the institute's members, we want to see a robust,

competitive online advertising," said the organisation's head of

digital Nigel Gwilliam in comments reported by The Guardian.

"We could not support an alliance which risked making Yahoo!

financially and operationally dependent on Google, in whose hands so

much of the search advertising market already resides.

"The widespread opposition to this alliance and the interest of both

US and EC anti-competition authorities speaks volumes."

Concerns over softening ad spending, the impact of the global

financial crisis and questions over the Yahoo! deal have taken their

toll on Google's share price, which a year ago this week hit an

all-time high of $US741.79.

Yesterday the company's stock closed at $US346.49, less than half the

value the shares traded at a year ago but up from a 52-week low of

$US328.98 on October 9.

Fairfax Business Media

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