The U.S. Senate opened hearings on a pending Yahoo-Google partnership Tuesday. The Antitrust, Competition and Consumer Rights committee means to put the screws to each party's legal counsel in an attempt to determine whether the deal violates antitrust laws.
Google is the number-one search site, while Yahoo currently hosts the second most popular site. Ad revenues from searches are a multibillion-dollar market. Lawmakers want to ensure that a deal between these giant players won't jeopardize free competition.
Among those who testified Tuesday in favor of the deal were Michael Callahan, general counsel for Yahoo, and David Drummond, general counsel for Google. On the opposing side, Microsoft sent Senior Vice President and General Counsel Brad Smith.
The Google-Yahoo Mashup
According to the terms of the proposed deal, Yahoo would share search results with Google. When a visitor enters a search term on the Yahoo site, instead of displaying only Yahoo advertisers, the search would also serve up selected ads from Google's vast list of advertisers.
In statements made after the announcement on June 12, Yahoo executives estimated the deal would net Yahoo nearly $800 million a per year. Yahoo can decide which search terms include Google's ad links, and when.
Critics worry that the search giants could easily manipulate ad rates and competitive listings. The Senate hearings hopes to shed light on that issue. According to committee member Sen. Patrick Leahy (D-Vermont), "The online advertising industry in the U.S. reportedly surpassed $21 billion last year. As more people use the Internet more often and with increased purposes, advertisers will similarly move to online platforms to move their message. The issue for the committee today is whether these advertisers -- be it Orvis or the Vermont Teddy Bear Company -- will find options at competitive prices."
Pros and Cons
Drummond told the committee, "The agreement will not affect Yahoo's natural search results. Yahoo will continue to operate its own search engine and display natural search results in the same manner it does today. The arrangement therefore will not increase Google's share of search traffic, contrary to some claims."
Smith countered, "Google and Yahoo have teamed up in a deal that affects approximately 90 percent of all search advertisements sold in this country. If permitted to proceed, we believe the Google/Yahoo agreement would effectively create a monopoly in search advertising." Microsoft has a dog in this particular hunt -- it has unsuccessfully tried twice to take over Yahoo's search business this year.
Also up for comment Tuesday were Mathew Crowley, chief marketing officer of Yellowpages.com, and the CEO of Askthebuilder.com.
Crowley told the committee, "Competition from an independent Yahoo is the only thing that keeps Google (which already accounts for about 70 percent of all search-advertising revenue) from achieving complete control over the online search advertising business."
Smith also testified that Yahoo CEO Jerry Yang bragged about a possible Google deal while in negotiations with Microsoft.
The House is scheduled to hold a hearing on the matter Wednesday afternoon.
Image credit: United States Senate .