However, in a filing with the U.S. Securities and Exchange Commission, both the companies only disclosed detail of the contract governing the partnership, but Google and its chief rival Yahoo have kept secret the pact’s financial terms — including compensations and revenue split deal.
“The magnitudes of other ties between the two companies also were not disclosed as well.”
Both Yahoo and Google have entered into an alliance for a ten year period, struck in June of this year, where Google would provide Yahoo with ad services to run alongside Yahoo’s own Web search system. Yahoo may also run Google-supplied ads on non-search Yahoo web properties, as well as on current members of its partner network. This deal will affect almost 90% percent of all search advertisements sold in U.S.
Despite the criticism and antitrust concerns, Yahoo views the agreement with Google as a positive approach which will help the co. become a stronger competitor. Yahoo has also mentioned that the partnership — represents a substantial revenue opportunity of as much as $800 million a year, and $250 million to $450 million in annual operating cash flow after the agreement goes into effect.
The agreement was included as an exhibit to Yahoo’s quarterly financial statement, which the Internet search pioneer filed with the Securities and Exchange Commission.
Yahoo’s advertising agreement with Google is currently receiving a formal review by the U.S. Department of Justice, which is investigating whether the deal will raise antitrust issues. Meanwhile, various attorneys general are also investigating the deal for possible antitrust violations, including those in Connecticut, Florida, and Arkansas. Congress held a hearing last month to discuss the agreement, although it has no regulatory powers to either bless or nix the deal.
Under the pact, Yahoo will provide Google’s advertisements alongside its own search results. Yahoo has previously said it does not believe its open-ended deal is anticompetitive, citing it is under no obligation to run a certain number of Google’s ads, or give its competitor’s ads favorable placement on its search results pages.
Businesses in the Internet industry typically jealously guard the terms of such contracts to protect their ability to negotiate pricing at variable terms with other customers.
Critics say the agreement endangers competition for advertising that runs alongside Web searches. Congressional leaders have conducted hearings to investigate what impact the partnership could have on the Internet market. The agreement covers the United States and Canada, but not other international markets.
However, rivals such as Microsoft Corp. warn that Google has become the Internet’s dominant force and under a ‘permitted-to-proceed scenario’ from the U.S. Justice Department, a Yahoo deal will severely limit search ad options, granting Google an effective monopoly in search advertising and subsequently reducing innovation.
Google and Yahoo continue to characterize their partnership as ‘non-exclusive’, which according to them reduces the pact’s anti competitive effect. Additionally, they believe their agreement does not require regulatory approval. Nevertheless, in June U.S. Senator Herb Kohl, chairman of the Senate Antitrust Subcommittee said in a statement:
“This collaboration between two technology giants and direct competitors for Internet advertising and search services raises important competition concerns. The consequences for advertisers and consumers could be far-reaching and warrant careful review, and we plan to investigate the competitive and privacy implications of this deal further in the Antitrust Subcommittee.”
But the contract is heavily redacted in an area that covers “other business opportunities” and is silent about how the sharing of user data between the partners could affect the privacy of Yahoo users.
While the contract reveals details of previously disclosed plans to make Yahoo Messenger and Google Talk, the companies’ instant messaging (IM) systems, work together, it redacts four of the five other points in this “other business” section.
Spokesmen for Google and Yahoo were not immediately available to comment on the contract.