The Real Deal on the Yahoo/Google Agreement

Facts and Fictions

This agreement gives Google control of over nearly 90% of the search advertising market.
FICTION

THE FACTS
► This agreement will not extend Google’s share of any market – Google simply agreed to make its
search advertising available to Yahoo!, entirely at Yahoo!’s discretion. Yahoo! will have the option to
show Google ads in addition to or in place of its own sponsored search ads, or, for example, when it
lacks its own ads to match to an uncommon search term.
► This option will strengthen, not weaken, Yahoo!’s position and enable us to improve our ability to
monetize search results for terms where our own marketplace has no coverage, less coverage or less
relevant coverage.
► Google will not have access to or control over Yahoo!’s customer relationships, ads or pricing.
► This is a non‐exclusive agreement between Yahoo! as a publisher and Google as a supplier of ads.
Yahoo! will continue to run all of its sponsored search auctions and provide advertisers opportunities
across the entire spectrum of online advertising, including search.


The auction process can be manipulated by Google, is not controlled by advertisers and is not
independent.

FICTION


THE FACTS:
► Google and Yahoo! auctions are, and will remain, totally independent from one another. Yahoo!'s
auctions will continue to be driven by the prices advertisers are willing to pay, not the companies
themselves.
► These auctions have a proven track record for ensuring fair pricing that reflects advertiser demand and
ad effectiveness, creating a highly democratic, liquid marketplace in which even small businesses with
limited budgets can achieve marquee placement if they write high‐quality ads.


The agreement will drive up the cost of search advertising. Google and Yahoo! will display
only ads most profitable for themselves. FICTION

THE FACTS:
► Search‐advertising pricing has always been performance‐driven and set by advertisers at auction, not
by Google or Yahoo! The agreement does not change this dynamic. Neither company can arbitrarily
set prices – any more than EBay or the New York Stock Exchange can mandate the cost of an item or a
share in a company – because they’re driven by the forces of demand and supply in the marketplace.
► Ad price is only one part of the story. A more important measure for advertisers large and small is the
return on investment of their advertising dollar. The Google‐Yahoo! agreement will help advertisers
convert more clicks into customers by showing more relevant ads on Yahoo!, giving advertisers a better
return for every dollar they invest. Thus any increase in costs is expected to be offset by a
corresponding increase in ROI.
► Advertisers ultimately are in control of how much they spend because they only pay what an ad is
worth to them. The bottom line is that consumers should see more relevant ads and advertisers should
attract more customers.

Quality scores inherently drive up the cost of advertisements.

FICTION

THE FACTS:
► All the major search engines, including Yahoo! and Microsoft, assign quality scores. A quality score
helps ensure that users see the most relevant ads, not just the most expensive ones, by introducing
feedback into the auction process regarding what ads consumers prefer based on how they respond to
the ads.
► By including quality scores into such systems, we permit smaller companies to more effectively
compete with larger businesses by creating highly relevant ads and websites.


Minimum pricing by Yahoo! and Google amounts to price fixing, as it sets a unified floor for
ad prices that will dominate the entire market.


FICTION

THE FACTS
► Google and Yahoo! will continue to set minimum bids in their auctions independently. Search ad
companies like Google and Yahoo! use minimum bids to give advertisers a realistic starting point for
how much it will cost to productively show their ads, based on our overall visibility into the separate
marketplaces. Minimum bids also help deter low‐quality spam ads.
► Neither Google nor Yahoo! has ever based minimums on what competitors are doing and this
agreement is not going to change that.


There will no longer be a need to purchase ads on Yahoo!, diminishing industry competition,
and this agreement will reinforce Google’s dominance in search, not just search advertising.


FICTION


THE FACTS:
► Testing shows that Yahoo!, in part due to its independent search capabilities, competes aggressively
with Google on the most valuable search terms and across some of the most widely trafficked industry
sectors like autos and finance.
► There is no guarantee that a Google ad will appear on Yahoo!, since selecting ads from Google is at
Yahoo!’s discretion. We remain a leader in integrating display and search advertising solutions as well
as in providing independent search results. So, advertisers have ample reason to continue to look to
Yahoo! to help achieve their marketing goals.
► If anything, the agreement will better help Yahoo! to strengthen its competitiveness by improving
monetization of its least profitable search results, increasing funds available to drive product
development and innovation.

► This agreement only applies to the U.S. and Canada, and excludes the fast‐growing mobile segment of
the business.
► Finally, recall that Yahoo! is incentivized over time to not depend on a slice of revenue from Google ads,
but rather to improve its products so that it can capture 100% of the revenue from its own inventory.