Yahoo and Google Reworking Ad Deal?

Yahoo and Google are looking at scaling back their proposed search advertising partnership in an effort to gain U.S. antitrust approval.

Internet giants Yahoo and Google are reportedly looking at scaling back their proposed search advertising partnership in an effort to gain approval from U.S. antitrust regulators. The two companies have been struggling to gain regulatory approval for a pact that would enable Google—already the leader in online search advertising—to non-exclusively sell advertising on Yahoo search results pages. Other players in the search advertising marketplace have cried foul, since the deal would arguably extend Google’s reach in the market even further and drive up advertising prices.

According to media reports and sources in both companies, Google and Yahoo have submitted a revamped version of the agreement to the U.S. Justice Department that scales back the term of the partnership from ten years to a duration of just two years and limits the portion of search advertising revenue Yahoo can collect from Google to 25 percent of Yahoo’s overall search advertising business.

Industry watchers have mixed view on whether the revised deal would able to gain regulatory approval: the bottom line seems to be that Google’s share of the search advertising marketplace is already so large that any increase through partnerships will undergo a high degree of scrutiny. Analysts also wonder whether the revised deal with Yahoo would pay off well enough for it to be worth Yahoo’s effort: Yahoo was counting on pulling in as much as $800 million per year from its alliance with Google.

The restructured deal proposal comes as more Yahoo executives depart the company for other opportunities. The head of Yahoo’s U.S. media business Scott Moore is departing (to be replaced by former Microsoft manager Jeff Dossett) and Alan Warms, the head of Yahoo News, will be replaced by Yahoo’s vice president of programming Neeraj Khemlani. In the meantime, Yahoo is also known to be looking at a merger with Time Warner’s AOL business unit, with both companies looking at each others’ books to see how a combined business might play out.