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Wednesday, November 05, 2008

Google to Abandon Advertising Partnership With Yahoo

By Christine Giardina

FOXBusiness

The Google-Yahoo! advertising pact was officially ended today amid pressure from regulators and advertisers.

Google Inc. (GOOG) Chief Legal Officer David Drummond said in the Google Blog that the search giant would begrudgingly end its deal with Yahoo! Inc. (YHOO) as “government regulators and some advertisers continue[d] to have concerns about the agreement.”

The agreement that was announced in June would have granted Yahoo! the use of Google’s advertisements displayed alongside search results for its own Web site, and for its publisher partner’s Web sites in the U.S. and Canada.

“It would have allowed Yahoo! to show more relevant ads for queries that currently generate few or no advertisements,” Drummond said. “Better ads are more useful for users, more efficient for advertisers, and more valuable for publishers.”

Yahoo! shares are down 42% year-to-date, while Google is off by 46%.

“Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners,” Drummond said. “That wouldn't have been in the long-term interests of Google or our users.”

Yahoo! management rejected Microsoft Corp.’s (MSFT) offer of a $47.5 billion takeover nearly six months ago. As Yahoo! was expecting the deal to satisfy the still-restless shareholders as well as boost revenue, the abandoned agreement results in a major setback for the search engine.

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