Don’t listen to Jerry and Sue: Yahoo’s search deal with Google won’t be a slam dunk to get past antitrust regulators. So says Stifel Nicolaus analyst Blair Levin, a former FCC staffer.
The key issue, says Levin in a note issued this morning: Whether Yahoo will be able to maintain the “ability and incentive” to keep its own search advertising product, Panama, alive.
Yahoo (YHOO) execs insisted that they’ll continue to use Panama where it offers them better terms than Google’s (GOOG) search ads, like popular, mainstream search queries, using Google primarily on more obscure, “long-tail” search queries.
“But we believe the companies need to do a better job than they did on yesterday’s calls to answer the question why the efficiencies of the deal won’t ultimately lead advertisers to move to Google, leaving Yahoo without a viable search advertising product and Google as the only search advertising game in town,” Levin says.
On Thursday’s call, Yahoo execs talked up the fact that the deal was nonexclusive; that Yahoo controlled which keywords Google’s ads would be placed on; and that Yahoo might end up helping Google with display ads, etc. All of those are good starts, but not convincing enough, Levin says.
Yahoo and Google don’t need to get advance approval from the DOJ for their deal, but the two companies say they’re waiting three-and-a-half months to pull the trigger out of courtesy, so the feds can sniff around. That’s telling, Levin says: It says that Yahoo and Google do believe this is trickier to pull off than they’re letting on, and that they believe “that DOJ believes the arrangement poses serious issues.”
The deal is only for the U.S. and Canada, so it won’t face European regulators, which is no surprise: The EU was much tighter than the U.S. approving Google’s deal to acquire DoubleClick last year.
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