[A2k] WAN Communiqué on the Proposed Google-Yahoo Dea l

[Manon Ress]

WAN Communiqué on the Proposed Google-Yahoo Deal

http://www.wan-press.org/article17866.html

For over 60 years, the World Association of Newspapers [W.A.N.] has
vigorously defended the freedom of the press. From its beginning,
W.A.N. has recognized that newspaper journalism can be truly free only
if newspaper publishers are economically independent. This means
having the freedom to decide what news to publish, where to publish
it, and the ability to build sustainably profitable businesses around
it. As newspaper publishers endeavor to adapt to the Internet, their
independence increasingly hinges on their ability to monetize news
through online advertising.


In this pursuit, one company - Google - has emerged as the significant
market power in online advertising. Google has built a very impressive
business in 10 years, generating billions of dollars by indexing and
linking to online content, then profiting from it through Google’s own
ads. However, of the very impressive $48 billion in online advertising
revenue that Google has amassed since 2001, less than one third of
that has been returned to online publishers (1), and a much tinier
fraction has benefitted the news and content generation industries. As
such, most publishers are acutely aware that Google’s ever-tightening
grip on internet traffic, its unbridled use of online content, and its
dominance in online advertising poses a very real threat to the
continued viability of the independent content generation industry.

It should be pointed out that most of W.A.N.’s 18,000 newspaper title
members are, in fact, regular customers of Google (and to a lesser
extent, Yahoo). These publishers depend on Google (and Yahoo) for a
significant portion of their online advertising revenue and rely on
each company’s respective search engines (both their paid search ads
and their natural search results) to drive traffic to their websites.
To date, competition between both these two search companies has
provided a necessary check to any potential market abuses, and has
helped to ensure that publishers and content generators are capable of
earning an equitable and fair return on their content.

It is in that context that W.A.N. believes that the competition that
currently exists between Google and Yahoo is absolutely essential to
ensuring that our member titles receive competitive returns for online
advertising on their sites, and for obtaining competitive prices when
they purchase paid search advertising. In our view, the proposed
advertising deal between Google and Yahoo would seriously weaken that
competition, resulting in less revenues and higher prices for our
members. W.A.N. is also concerned that this deal would give Google
unwarranted market power over important segments of online advertising.

While Google and Yahoo have stated that their proposed agreement is
limited in scope to North America, W.A.N. believes it will have a
significant and adverse effect on all newspaper publishers worldwide,
as it could have the potential of reducing the incentive for Yahoo to
vigorously compete against Google across the globe.

It is against this stark reality that W.A.N. strenuously opposes
Google’s attempt to take over a portion of Yahoo’s content advertising
and syndicated search businesses. Google already substantially
dominates both businesses and its market dominance is growing by the
day. Yahoo is (and should continue to be) Google’s most significant
competitor in the syndicated search business and is (and should
continue to be) its only real competitor in content advertising.

The effects of the Google-Yahoo deal on the economy and independence
of newspapers would be felt in at least three ways:
1. Less Competition Means Less Revenue

First, the Google-Yahoo deal means less revenue for newspapers. Google
and Yahoo today are the two leading suppliers of content ads and
syndicated search ads to online news sites, and they compete intensely
for that business. This competition forces each company to offer the
best possible terms and helps ensure that newspapers earn a fair
market return for the right to display ads and search boxes on their
sites.

The proposed deal will fatally weaken Yahoo as a competitor for these
deals. Advertisers will increasingly migrate to Google since they will
see diminishing price advantages to advertising through Yahoo. Yahoo
will then have fewer of its own ads to serve and therefore less
ability to offer a better deal than Google. This problem will grow
over time because Google - in a clear display of its true intent - has
refused to allow Yahoo to show Google ads on the websites of new
publishing partners it acquires after the deal is finalized. In other
words, Google has imposed a condition that impedes one of Yahoo’s last
remaining opportunities to compete with Google.

What this means for newspapers is that Yahoo’s bids for their ad
business will almost certainly be lower than they are today. And
because Google will almost certainly acquire valuable insider
knowledge about Yahoo’s ad business, it will be in a much stronger
position to predict Yahoo’s “best” bid to newspapers for these deals,
which will allow Google to bid just slightly over that amount.
2. Less Competition Means Higher Costs

The Google-Yahoo deal will also force newspapers to pay more to
attract readers. The reality is that a large portion of the traffic to
most online newspapers’ websites today comes through paid search or
natural results on search engines. For this reason, competition among
search engines is absolutely vital for newspapers - to ensure that no
search engine can set monopoly prices for paid search ads, and to
prevent any search engine from influencing users’ surfing habits by
manipulating unpaid search results. The proposed Google-Yahoo deal is
bad news for newspaper publishers on both counts.

With respect to paid search ads, the deal can be perceived as an
agreement to fix prices. Today, Google typically charges more than
Yahoo for the same paid search ad - between 20% and 35% more on
average, according to industry estimates. So newspapers that now
purchase ads from Yahoo to attract readers will in the future be
forced to buy these very same ads from Google - except at a
substantially higher price. Indeed, a recent study found that prices
on Yahoo will increase by an average of 22% under the deal (2).

The deal also poses a longer-term threat to newspapers’ ability to
attract readers through natural search results. Today, competition
between the search engines impedes their ability to manipulate search
results. To the extent that the deal weakens Yahoo as a competitor, it
will solidify Google’s vice-like grip on the search engine business at
the same time that Google is expanding its own content businesses,
such as Knol. As its monopoly grip continues to strengthen, Google
will have increasingly powerful incentives to favor its own and its
chosen partner sites and to divert users away from competing sites.
Newspapers will then become even more reliant on paid search ads to
attract readers - ads that will be even more expensive as a result of
the deal.
3. Less Competition Means Even Greater Dependence On Google

The upshot is that the deal will force newspapers to become even more
dependent on Google than they are today. By handing Google control of
up to 90% of paid search and content advertising, Google will exert
tremendous power over both newspapers’ ability to reach readers and
their ability to generate online advertising revenue. Perhaps never in
the history of newspaper publishing has a single, commercial entity
threatened to exert this much control over the destiny of the press.

It is particularly worrisome that this consolidation of power is
occurring at the same time that Google increasingly takes positions
that are adverse to newspapers and other content creators. Google
already owns several content sites that directly compete with content
developed by newspapers and other creators - often by simply copying
others’ content without authorization. Usually, Google alone profits
from this misappropriation. Take, for example, the case of Google
News, which a Google senior executive recently admitted drives $100
million in advertising revenue to Google itself yet provides nothing -
not a penny - to the newspaper companies whose works appear on those
pages (3).

Google’s hostility to publishers and content creators extends to other
areas as well. For instance, Google has been dismissive of the
Automated Content Access Protocol, a joint initiative spearheaded by
WAN, the International Publishers Association, the European Publishers
Council, and several other organizations to develop a web-crawling
technology that would enable online publishers to retain greater
control over the content they place online. Its ongoing and clear
disregard for copyrights has led many to sue Google over infringements
on YouTube and many others to sue over infringements by Google Book
Search. In short, further solidification of Google’s search and
advertising market dominance, as will inevitably result from its deal
with Yahoo, will be detrimental to all content creators and ultimately
to the public.

For over half a century, W.A.N.’s mission has been guided by the
realization that the journalistic integrity and economic independence
of newspapers are two sides of the same coin. Freedom of the press is
too important to rest in the hands of a single company. While
newspapers rely on Google for a significant portion of their online
advertising revenues, we rely even more on the robustness of Google’s
competitors to place constraints on its power.

The Google-Yahoo deal would spell the end of this competition, thereby
further weakening the viability and economic independence of the
world’s newspapers. We must speak out now and urge regulators to block
this anti-competitive deal.






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article

(1) Mike Liedtke, Google celebrates 10 years, looks ahead, Associated
Press (6 Sept. 2008).

(2) SearchIgnite, Potential Impact of Google-Yahoo Partnership & Cost
to Marketers, Q2 2008.

(3) Jon Fortt, What’s Google News worth? $100 million, Fortune, 22
July 2008.

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Manon Ress
manon.ress@keionline.org,

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