An advertising agency group that includes four of the world's biggest advertising agencies said Monday that it supports the planned Internet search and advertising deal between Microsoft Corp. (MSFT) and Yahoo! Inc. (YHOO). The deal is currently under antitrust review by the U.S. Justice Department.
Nancy Hill, President and CEO of American Association of Advertising Agencies, or AAAA, signed an open letter to the Justice Department on Monday, which was also signed by Maurice Levy, chairman and CEO of Publicis Groupe SA (PUBGY.PK), Martin Sorrell, CEO of WPP Group plc (WPP.L), Michael Roth, chairman and CEO of Interpublic Group of Companies Inc.(IPG), and John Wren, president and CEO of Omnicom Group Inc. (OMC).
In the letter, the agency group said, "We believe that Yahoo! and Microsoft's proposal to combine their technologies and search platforms is good for advertisers, marketing services agencies, website publishers and consumers."
The advertising agency group urged the Justice Department to bring its antitrust review to a speedy conclusion, saying that a healthy, competitive market for search and search advertising is crucial to the Internet's future.
"This proposal enhances competition, and should be allowed to take effect as soon as possible," the agency said in its letter.
The agency's backing is seen as likely boosting the deal's chances of securing antitrust approval.
Google Inc. (GOOG) and Yahoo had announced a similar search deal in June 2008, wherein Google ads would be displayed alongside Yahoo's own search results. However, the non-exclusive deal failed to pass antitrust review and was consequently blocked.
In end July, Microsoft and Yahoo announced forming a search pact, bringing the rivals together in a ten-year deal pitching them directly into battle against Google in the search market share. Based on traffic generated on Yahoo!'s network of both owned and operated, and affiliate sites, Microsoft will compensate Yahoo!'s traffic acquisition costs through at an initial rate of 88% of search revenue generated on Yahoo!'s sites during the first five years of the deal.
According to Internet data tracking firm comScore Inc.comScore, Inc. (SCOR) last week, Google continued to lead the U.S. core Web search rankings in September, while Yahoo stood a distant second. Google sites accounted for 64.9% search market share in September, up from 64.6% in August.
Yahoo continued to hold the number two overall U.S. core search ranking during September, with its sites combining to represent 18.8% of all searches, down from 19.3% in the previous month. Microsoft saw its search sites remaining in the number three spot during September. The company's share of the core search marketplace rose to 9.4% in September from 9.3% in August.
Yahoo had said it anticipates the search deal to result in annual GAAP operating income of about $500 million and capital expenditure savings of about $200 million, following complete implementation of the terms of the deal. However, just hours after the deal was announced, antitrust issues began to crop up.
Last month, reports said that the Justice Department asked agency regulators to closely examine the Microsoft-Yahoo search pact. Reports citing Microsoft spokesman Jack Evans said the company expected a close review. The deal terms were that Bing would be the default search engine search provider on Yahoo's websites, while Yahoo would handle worldwide sales for both companies' premium search advertisers.
Microsoft and Yahoo have garnered support for this deal from marketers, who say that the two companies together will pose a more significant challenge to Google than either company does separately. Advertisers are keen to see the might of Google challenged, even if it means reducing the field of competitors to two.
MSFT closed Monday's regular trading session at $26.36, down $0.14 or 0.53% on a volume of 48.14 million shares, while YHOO closed at $17.22, up $0.41 or 2.44% on a volume of 17.88 million shares.
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