Ad giants back Microsoft-Yahoo deal

20 October 2009

WASHINGTON, DC: The four biggest advertising agency holding companies - Omnicom Group, WPP Group, Interpublic Group and Publicis Groupe - have all issued their support to the proposed tie-up between Microsoft and Yahoo, arguing it will stimulate competition in the online search ad market.

As previously reported, Microsoft and Yahoo agreed a ten-year global partnership earlier this year, as the two companies sought to counteract Google's dominance of this area of the internet.

Under the terms of the deal, Microsoft will use its "decision engine", Bing, to deliver all of the search results generated via enquiries on Yahoo's homepage, and also be able to integrate Yahoo's search technology into its own system.

Yahoo will receive revenues based on the amount of traffic delivered through its web properties, and also take on a global sales role for the two firms' "premium search advertisers" for the first two years.

The deal is subject to regulatory scrutiny from the Department of Justice, a fact that was previously argued to have dissuaded Google from finalising an alliance with Yahoo last year.

Sir Martin Sorrell, chief executive of WPP Group, once famously described Google as a "frenemy", and while his stance has since softened somewhat, he has also called for enhanced competition in the search sector.

Now, Sorrell, along with Omnicom's John Wren, Publicis' Maurice Lévy and IPG's Michael Roth, has added his name to an open letter to the DoJ, published on the website of the 4A's, the US trade body.

In it, Nancy Hill, chief executive of the 4A's, argued "advertising is the fuel that powers the internet. Most websites depend on online advertising to survive – it's what allows them to offer consumers free content and services."

"A very important form of online advertising is search advertising – the sponsored links that appear when a search engine answers a query. A healthy, competitive market for search and search advertising is crucial to the internet's future."

More specifically, the letter continued, Yahoo and Microsoft's alliance would offer benefits for players in all the key areas of the ad industry.

"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," it said.

"These benefits are too important to wait for. As leading members of the advertising and marketing services industry, we urge the Department of Justice to bring its antitrust review to a speedy conclusion. This proposal enhances competition, and should be allowed to take effect as soon as possible."

According to the Wall Street Journal, a spokesman for Yahoo said the company is "hopeful that the closing of this transaction can occur in early 2010", while Steve Ballmer, ceo of Microsoft, said last week the DOJ's review was "going along."

Data sourced from Reuters, Wall Street Journal, 4A's; additional content by Warc staff