Washington — Countries that are fully conscious of the consequences of how a lobbying can stifle an economy — Google Inc., which is already facing the heat of U.S. Department of Justice inquiry of its advertising partnership with Yahoo Inc., came under fire Sept. 15 from the Paris-based World Association of Newspapers, which raises concerns that a deal between Yahoo and Google could cause the prices of online ads to become prohibitively high worldwide.
The group, which represents 77 national newspaper associations and 18,000 newspapers worldwide, criticized a deal struck in June in which Google will supply Yahoo with advertising services to run alongside Yahoo’s own Web search system. The two companies together could have more than 80 percent of the search market.
The group argues that an agreement between the two Internet giants “will have a significant and adverse effect on all newspaper publishers and could increase the costs of online ads to become excessively high worldwide,” has asked the competition authorities in European Commission, the U.S. Department of Justice, and the Competition Bureau of Canada to step in and block the deal.
“Competition amid both these two search companies has bought in a necessary check to any potential market abuses, and has helped to ensure that publishers and content generators are capable of earning an equitable and fair return on their content,” the group said in a statement.
“W.A.N. strenuously objects Google’s attempt to take over a portion of Yahoo’s content advertising and syndicated search business,” the newspaper group said.
“In our view, the planned advertising pact between Google and Yahoo would severely deteriorate that competition, resulting in less revenues and higher prices for our members. WAN is also concerned that this deal would give Google unwarranted market power over important segments of online advertising,” Gavin O’Reilly, WAN president, said in a letter to the three agencies.
Amidst Microsoft’s futile bid to purchase Yahoo, Yahoo and Google in June announced plans for a “non-exclusive” agreement that lets Yahoo access Google’s AdSense for search and content advertising programs in the U.S. and Canada.
The deal could adversely impact the economy and the newspaper business in at least three ways, according to O’Reilly.
According to WAN’s assumption is that strengthening the bond between the world’s #1 and #2 suppliers of online advertising makes it more difficult for newspapers to compete, by squeezing the supply and availability of inventory to customers. Newspapers rely on Google and Yahoo for a big chunk of their advertising revenue, since they often serve as their online advertising platform; so maintaining their independence, the theory goes, will ensure the level of competition necessary to keep rates low and availability high.
“The rivalry that currently prevails between Google and Yahoo is absolutely essential to ensuring that our member titles receive competitive returns for online advertising on their sites, and for obtaining competitive prices when they purchase paid search advertising,” reads the WAN’s statement on the matter, published this morning.
“The anticipated agreement will fatally weaken Yahoo as a competitor for these deals;” according to a WAN communiqué on the issue. “Advertisers will increasingly migrate to Google since they will see diminishing price advantages to advertising through Yahoo. Yahoo will then have fewer of its own ads to serve and therefore less ability to offer a better deal than Google.”
This reduced revenue will then lead to increased costs, WAN said. The majority of traffic to news Web sites comes from paid and natural search through search engines.
The group’s protest comes as regulators across the U.S. are stepping up their investigation 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 inquiry to determine whether the deal gives Google too much control over the online advertising market.
The European Commission said September 15 that it is investigating whether the Google-Yahoo advertising deal go against 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 newspaper association expressed concern the deal was announced as publishers battled Google over copyright issues. The group also debated that “with respect to paid search ads, the deal can be perceived as an agreement to fix prices.”
Citing numerous examples of Google’s “hostility” towards publishers, the communiqué suggests implementation of the planned “anti-competitive” partnership with Yahoo will weaken “the viability and economic independence of the world’s newspapers.”
Google usually charges between 20 and 35 percent more than Yahoo on average, the group said, citing a study that found that “prices on Yahoo will increase by an average of 22 percent under the deal.”
Nonetheless, the matter has started to gather scrutiny on Capitol Hill. Rep. Joe Barton, a Texas Republican and ranking member of the House Energy and Commerce Committee wrote a letter to Yahoo CEO Jerry Yang in June expressing concern about how the deal “will impact competition within the online search advertising industry.”
The WAN’s leadership hails from such diverse sources as Canada’s Globe and Mail, Brazil’s RBS Newspapers, The Times of India, the Times of London, The New York Times, and the Yemen Times.
Google did not respond to a request for comment. However, CEO Eric Schmidt last month stated that the companies would set the deal in motion by early October as planned.