Google Inc is considering dropping its proposed Internet-search advertising venture with Yahoo! Inc because it is reluctant to accept restrictions to avert a possible court challenge by US antitrust officials, people say.
A collapse of the planned venture between the two biggest online advertising companies would deprive Yahoo of as much as US$450 million in operating cash flow over a year. Microsoft Corp offered as much as US$47.5 billion to buy Yahoo earlier this year.
Google is pondering pulling out of the agreement with Yahoo because it doesn’t want to accept conditions the government may require to avoid harm to competition in the market for online advertising based on Internet searches, people familiar with the matter said.
Google may have thwarted an acquisition of Yahoo by Microsoft simply by tying up the firm in a lengthy US Justice Department review, said Rebecca Arbogast, an analyst for Stifel Nicolaus & Co.
“This kept Yahoo out of the arms of Microsoft for a good long time,” Arbogast said. “That is a very good, practical outcome from their point of view. Given further shrinking and problems at Yahoo, it could be that they kept Yahoo out of Microsoft’s arms forever.”
Adam Kovacevich, a Google spokesman, declined to comment on Thursday, saying “we are still talking” with the Justice Department.
Yahoo spokeswoman Tracy Schmaler said in an e-mailed statement that “discussions are ongoing” with the government.
“We believe strongly that this agreement will strengthen Yahoo’s competitive position in online advertising and will help to drive a more robust, higher quality Yahoo marketplace for our advertisers, publishers and users,” she said.
Earlier this month, Yahoo and Google said they had agreed to a “brief” delay in the start of the venture to give US antitrust enforcers more time to study it.
The people said Google must decide whether the venture would still make sense if, for instance, it agreed to limit the number of ads that it places on the Yahoo site.
Another possible condition might be to give advertisers the ability to opt out of the ad-sharing if they don’t want to bid in an auction for the right to place ads on Google and Yahoo Internet search pages, the people said.
The Justice Department has been collecting sworn statements to prepare for filing a lawsuit seeking to block the venture if no agreement on conditions is reached, they said.
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