Microsoft e-mail campaign takes aim at Google deal

By Peter Kaplan

WASHINGTON (Reuters) - Microsoft (MSFT.O) launched a campaign on Friday to enlist supporters in its opposition to a new advertising collaboration deal between Google (GOOG.O) and Yahoo (YHOO.O), two sources familiar with the matter told Reuters.

One day after the companies announced an agreement allowing Google to sell search ads on Yahoo's Web site, Microsoft contacted advocacy groups that work to influence policy in Washington.

According to one source who was contacted by Microsoft, the software company said in an e-mail that the Google-Yahoo agreement would "limit choices for advertisers and publishers" and "destroy a competitive alternative."

Specifically, Microsoft takes the view that the deal is akin to a price-fixing agreement, with Google and Yahoo effectively setting a minimum price for advertisements on some key word searches, according to another source familiar with Microsoft's thinking.

"The effect of that is sitting down and agreeing, 'We won't go below (the minimum price)'," this source said. Microsoft also believes the arrangement will lead to the demise of Yahoo's own search advertising business, eliminating a competitor, he said.

Microsoft declined to comment on any contacts involving the Google-Yahoo deal.

Microsoft spokesman Jack Evans on Friday reiterated Microsoft's overall objections to any Google-Yahoo deal, saying it would make the Internet advertising market less competitive.

"Our position has been clear since April that any deal between these two companies will increase prices for advertisers and start to consolidate more than 90 percent of the search advertising market in Google's hands," Evans said.