Google Scuttles Ad Deal with Yahoo

Google had proposed providing ads for some Yahoo searches in the United States and Canada. (By Paul Sakuma -- Associated Press)

But the Justice Department concluded that Google is the largest provider of both Internet search advertising and Internet search syndication, with shares of more than 70 percent in both markets.

"Yahoo! is by far Google's most significant competitor in both markets, with combined market shares of 90 percent and 95 percent in the search advertising and search syndication markets, respectively," the department said in a statement.

Microsoft, which has said it is no longer interested in acquiring Yahoo, fought hard to prevent the partnership between its two top competitors.

Microsoft General Counsel Brad Smith said the decision is "significant for advertisers, publishers and consumers, who voiced overwhelming concern about this illegal deal to law enforcement and policymakers."

Bob Liodice, chief executive of the Association of National Advertisers, said the partnership would have given Google too much influence over the online advertising market.

"It was truly a negative for the marketing community, and it represented a concentration of power that we found unacceptable," he said.

In an effort to address concerns, Yahoo had proposed an amended agreement that would have limited the length of the deal and the number of search ads Yahoo could outsource to Google.

The last-minute changes did not save the deal, and Yahoo played down the effect of Google's withdrawal on its strategy.

In an e-mail to employees yesterday, Yahoo President Susan Decker said she was "disappointed" that Google ended the agreement instead of defending it in court.

Still, she said the deal was "just one of many efforts that we have underway to accelerate our strategy."