Google, Yahoo partially disclose terms of ad pact

By Eric Auchard

SAN FRANCISCO (Reuters) - Google Inc (GOOG.O) and Yahoo Inc (YHOO.O) released on Friday excerpts of a pact covering their search advertising partnership that keeps secret financial terms and the extent of other ties between the two.

In a filing with the U.S. Securities and Exchange Commission, the companies take the unusual step of disclosing the contract governing the partnership, but leave out any financial terms, such as the revenue split on their deal.

Companies in the Internet industry typically jealously guard the terms of such contracts to protect their ability to negotiate pricing at variable terms with other customers.

Critics say the deal threatens competition for advertising that runs alongside Web searches. Congressional leaders have conducted hearings to investigate what impact the partnership could have on the Internet market. The agreement covers the United States and Canada, but not other international markets.

Rivals such as Microsoft Corp (MSFT.O) have protested that Google already controls 70 percent of the Web search ad market and that a Yahoo deal would give Google control over 90 percent of the market. Google and Yahoo executives have defended the pact, saying they will compete aggressively in other areas.

Seeking to shore up its advertising business while warding off pressure to merge from Microsoft, Yahoo struck the agreement in June with Google, the dominant supplier of Web search services in the United States and around the world.

Under the deal, due to take effect after a waiting period meant to help smooth regulatory approval, Google would supply Yahoo with advertising services to run alongside Yahoo's own Web search system. Yahoo runs the Web's second most popular search service.

Google and Yahoo have sought to portray the partnership as a non-exclusive arrangement in which Yahoo is effectively contracting with Google to sell ads alongside a portion of its search results. This in turn can allow Yahoo to focus on other aspects of its business where it is more strongly positioned.