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Google pulls out of Yahoo advertising partnership

Posted by Yogesh on Wednesday, 5 November, 2008

WASHINGTON: Google Inc is abandoning a planned advertising partnership with Yahoo Inc. in the face of a looming antitrust challenge by the government.

In a blog post, Google said that pressing ahead with the agreement “risked not only a protracted legal battle but also damage to relationships with valued partners.”

The deal, first announced in June, would have allowed Google to sell some of the online advertisements displayed alongside search results on Yahoo’s site.

Google’s retreat is a major setback for a beleaguered Yahoo. It had been counting on the deal to boost its revenue and placate shareholders still incensed by management’s decision to reject a $47.5 billion takeover bid from Microsoft Corp. nearly six months ago.

Yahoo struck the search deal with Google as a way to fend off Microsoft Corp’s unsolicited bid. By collecting the revenue from placing Google ads alongside its search results, Yahoo’s cash flow could grow by $250 million to $450 million in the first year of the deal, the companies had said in June. The deal has since been mired in the regulatory process.

In September, the Justice Department hired Sandy Litvack, its former antitrust chief and Walt Disney Co’s former vice chairman, to consult on its probe of the search deal. Source The Economic Times

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