Google backs out of advertising deal with Yahoo

The long awaited verdict is in with regards to the long awaited proposed advertising deal between Google and Yahoo. On Wednesday, Google officially announced its decision to bow out of the publicly scrutinized advertising arrangement. The proposed arrangement of search engines #1 and #2 working directly together created controversy and nearly became a legal trial, as the Justice Department announced on Wednesday that if Google and Yahoo moved forward with the ad deal they would file suit to block the deal.

This past week Google &Yahoo offered the Justice Department a significantly revised version of its original advertising partnership plans for approval. The revised plans were an effort to cooperate with the Justice Department, who has been scrutinizing the proposed deal in regards to its potential effect on competition. Analysts say that the deal was a no lose proposition for Google, as they had nothing to lose if the deal did not go through, and in the meantime Google was able to keep Yahoo out of the arms of Microsoft. Google’s chief legal officer David Drummond posted in their blog the following statement: “Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners. That wouldn’t have been in the long-term interests of Google or our users, so we have decided to end the agreement.”

The proposed advertising partnership has stirred up much controversy over the past few months among competition, investors,regulators and the Justice Department. Thomas O.Barnett, assistant attorney General to the Justice Department’s antitrust division said the following per press release:

“The arrangement likely would have denied consumers the benefits of competition-lower prices, better service and greater innovation.”

The majority of those concerned about the ad arrangement had relayed fears that Yahoo’s advertising system generates less profit from each search performed than Google’s. The Justice Department had stated its fears that the agreement would reduce Yahoo’s incentives to invest in its own search advertising ventures and end up submitting larger and larger portions of its ad business to Google. Brought to you by Blue Interactive Agency, your Fort Lauderdale interactive marketing firm.