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Yahoo joins Google in defending ad deal

Google has already launched a fusillade of blog posts and other commentary to defend its search-ad deal with Yahoo. Now Yahoo is following suit.

Yahoo and Google--put on the defensive by antitrust scrutiny and Microsoft agitating focused on the Internet companies' search-ad deal--are trying their best to reclaim the initiative as the project's launch date nears.

First came Google, with a series of blog posts and a frequently asked questions page. Now Yahoo has also joined in with a "myth-busting" blog post from Yahoo President Sue Decker.

Sue Decker

"Here's the bottom line," Decker wrote late last week. "Yahoo will use this agreement to help us become a stronger competitor in all aspects of online advertising; and Yahoo is not exiting the sponsored search business. We plan to remain a strong player in sponsored search."

The deal, with an initial four-year term and two optional three-year renewals, is expected to give Yahoo $800 million in new revenue in its first year. It's scheduled to begin in early October, and Google Chief Executive Eric Schmidt has said the ad deal remains on its launch schedule in the absence of any opinions from antitrust regulators.

Decker offered a detailed explanation about how the search deal works and why Yahoo wants it--an explanation that probably should have been offered much earlier in the discussion.

For example, Decker goes into more depth than Google has about advertisers setting prices for keyword bids. "Where Google is getting higher bids than Yahoo today, this is because advertisers perceive that Google is delivering more value--more targeted leads, more clicks, and more conversions. That's why an advertiser might be willing to bid more for a click on Google than for a click on Yahoo--the belief that the advertiser will get more value from Google. Google is not setting prices. Advertisers determine how to value keywords.

Early on, she takes issue with a statistic thrown around by Microsoft that the deal gives Google 90 percent share of the search-ad market, a statistic that derives from combining the two companies' individual share. "That's just plain wrong," she said. "It's important to note that the agreement is non-exclusive and gives us the option to 'backfill' with Google ads if and when we see fit. The reason we structured the deal this way--rather than a more typical exclusive deal with revenue commitments to us and traffic commitments to Google--was precisely to avoid the issues the critics are raising."

It's interesting that both companies decided this relatively late stage would be the time to sway public opinion.

Perhaps in the earlier stages they didn't want to appear to be bullying the Justice Department, the European Union, and other regulators trying to assess whether the deal is anticompetitive. Or perhaps they're growing more concerned about whether the deal will emerge intact.