Page last updated at 04:24 GMT, Friday, 12 September 2008 05:24 UK

Yahoo defends Google advert deal

By Maggie Shiels
Technology reporter, BBC News, Silicon Valley

yaho o fall day
Yahoo said its open strategy will change the whole user experience

Yahoo said it will implement its much-criticised search ad deal with Google despite possible anti-trust hurdles.

Under the agreement, from October Google will sell ads alongside Yahoo search results on some of its pages.

Rumours the US justice department would challenge the deal grew this week when it hired a veteran anti-trust lawyer.

Hilary Schneider, executive vice-president of Yahoo US, told the BBC the agreement was "fully within the guidelines of the law".

Both companies voluntarily agreed to have the US Department of Justice (DoJ) examine the plan, which was announced in June.

They also committed themselves to wait three and a half months to give regulators time to scrutinise it.

Google's chief executive Eric Schmidt recently said both companies were aiming to go forward with the deal.

david Filo yahoo co founder
David Filo said the company has worked closely with the Justice Dept

Now Yahoo has said even if the plan is not cleared by regulators, it will go ahead as planned.

"We are confident the agreement makes sense. We are committed to moving ahead," said Ms Schneider.

"Remember this is a voluntary process we engaged in and we think it's really working in terms of helping the Department of Justice understand the issues."


Yahoo co-founder David Filo added his voice to the debate and said he believed despite mounting criticism and talk of an anti-trust investigation, the DoJ would give its approval.

"We went to them (the DoJ) pro-actively and said 'let's go through a review'. We have done that and we are confident that all parties will agree this is good for competition in the long term. And so we are expecting them to agree with that."

Not everyone believes the US government should give its blessing.

Microsoft, which failed in its bid to buy Yahoo for $47.5bn (27bn) earlier in 2008, has said it feared the partnership would reduce competition in the search advertising market.

Yahoo building and flag
Yahoo's share price is well below the $33 Microsoft offered in the summer

The Association of National Advertisers, which represents major marketers, has also asked the DoJ to block the deal. Around a dozen states, including California, have all raised questions about the matter.

Combined, Yahoo and Google control more than 80% of the US search advertising market.

Yahoo expects to boost its annual revenue by $800 million (455m) as a result of the deal.

Open strategy

Yahoo's comments were made at an event to discuss its strategy to open its technology to third party developers.

It is seen as key to turning the company around, after share prices plummeted to a five-year low of $17.85 (10), well below the $33 (19) a share offered by Microsoft.

"It cuts across everything we are doing," said Mr Filo of moves to invite third party developers "to develop on top of our stuff, to be innovative and drive the market".

"It is pretty vital to our future success. I mean without it we are just not going to have the richness of products and services you will see if we don't open up."

Over the next couple of months Yahoo has said it will make changes to several popular sections of its website to accommodate more material from rival services as well as extend its advertising network so it can run ads on more internet properties.

The homepage will also be redesigned for the first time since 2006 to make it easier for users to tap into third party services or widgets.

pen yahoo fall day
Yahoo is trying to attract developers to create new mobile applications

The company also plans to open up its music section to rival services like Apple's iTunes and Amazon in the new few weeks. And the news section will also start to feature more local content.

Efforts are also being made to open up the e-mail system, which is the world's largest with upwards of 275 million users. And developers are being encouraged to use Yahoo's Blueprint platform to develop mobile applications.

Yahoo's chief technology officer Ari Balogh told BBC News the company's 500+ million users means Yahoo can spur innovation not just for Yahoo but potentially for the whole of the web.

"Open is literally the way we are going to unlock a lot of the value of Yahoo's assets and allow developers from across the web to build on Yahoo as well as take parts of Yahoo out.

"We think there are industry changing things we can do. It has certainly been a tumultuous time for Yahoo in the press and externally, but I think the thing people should take away is that we are continuing to innovate and to push the edge."

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