The world newspaper industry is heading for another showdown with Google.
The Paris-based World Association of Newspapers (WAN) has asked competition authorities in Europe and North America to block the advertising agreement between Google and Yahoo on anti-competitive grounds. The deal, WAN insists, would have a negative impact on the advertising revenues that the search giants provide to newspaper and other websites, and on the cost of paid search advertising.
WAN, which represents 77 national newspaper associations and 18,000 newspapers worldwide, called on the Antitrust Division of the United States Department of Justice, the European Commission’s Competition Directorate, and the Competition Bureau of Canada to examine the impact of the agreement and to block the deal.
“WAN believes that the competition that currently exists between Google and Yahoo is absolutely essential to ensuring that our member titles receive competitive returns for online advertising on their sites, and for obtaining competitive prices when they purchase paid search advertising,” says Gavin O’Reilly, WAN President.
“In our view," according to O'Reilly, "the proposed advertising deal between Google and Yahoo would seriously weaken that competition, resulting in less revenues and higher prices for our members. WAN is also concerned that this deal would give Google unwarranted market power over important segments of online advertising.”
Under the agreement between the search engine companies, Yahoo can run advertisements supplied by Google alongside Yahoo’s own search results. The deal would provide millions of dollars in revenue to Yahoo and strengthen Google’s dominance over the search engine advertising market.
“Google and Yahoo today are the two leading suppliers of content ads and syndicated search ads to online news sites, and they compete intensely for that business,” says WAN. “This competition forces each company to offer the best possible terms and helps ensure that newspapers earn a fair market return for the right to display ads and search boxes on their sites. The proposed deal will fatally weaken Yahoo as a competitor for these deals."
WAN also feels that advertisers will increasingly migrate to Google since they will see diminishing price advantages to advertising through Yahoo. Yahoo will then have fewer of its own ads to serve and therefore less ability to offer a better deal than Google. "This problem will grow over time because Google - in a clear display of its true intent - has refused to allow Yahoo to show Google ads on the websites of new publishing partners it acquires after the deal is finalised. In other words, Google has imposed a condition that impedes one of Yahoo’s last remaining opportunities to compete with Google. What this means for newspapers is that Yahoo’s bids for their ad business will almost certainly be lower than they are today.”
Although Google and Yahoo say the deal is limited to North America, WAN believes it would have a significant effect on European newspaper publishers and warrants investigation by the European Commission. “First, many of our European members are active in North America and will be directly harmed by any anti-competitive conduct there,” WAN said in its letter to European Competition Director Cecilio Madero.
“Second, we believe the deal will result in reduced incentives for Yahoo to compete against Google even in Europe, as Yahoo reportedly expects to earn hundreds of millions annually under the agreement. Also, because Google and Yahoo together control over 95 per cent of advertisers’ search advertising spending in Europe, the two companies could easily set the conditions for competition in the EU if they chose to do so.”
WAN has played a key role in developing the Automated Content Access Protocol (ACAP), which would allow online content providers more control over how the search engines access and exploit their content. Although ACAP has won wide support among newspaper companies and other online content providers, Google and Yahoo have yet to accept ACAP.
Google’s chief executive, Eric Schmidt, asserted immediately that he planned to introduce an advertising partnership with Yahoo early next month, whether or not regulators have finished reviewing the controversial pact. “My understanding of the way this works, because it is a commercial deal, we have a choice of when we implement it,” Schmidt said, according to the New York Times.
Even the US-based Association of National Advertisers, which represents advertising heavyweights such as Procter & Gamble and General Motors, has expressed concern that the partnership will likely diminish competition, increase concentration of market power, limit choices currently available and potentially raise prices to advertisers for high quality, affordable search advertising.
