Google and Yahoo delay search ad partnership

By Diane Bartz

WASHINGTON (Reuters) - Google Inc (GOOG.O) and Yahoo Inc (YHOO.O) have decided to delay implementing a controversial search advertising partnership, Yahoo said on Friday.

"The companies have agreed to a brief delay in implementing this agreement to continue our ongoing discussions with the (U.S.) Department of Justice," Yahoo said in a statement. "We have had discussions with regulators and look forward to responding to their questions about this agreement."

Google issued a similar statement.

"When we announced our advertising agreement with Yahoo in June we agreed to delay its implementation until October to give regulators time to look at the details. As we are still in conversation with the Department of Justice we have agreed to a brief delay in implementing the agreement while those discussions continue," the company said.

The delay was expected to last less than a month, a source familiar with the discussions on the issue told Reuters. "We're still looking at the time frame of October," the source said.

The deal, which allows Google to sell advertising for some of Yahoo's online advertising space, is unpopular with advertisers who fear higher prices. Google's web-search market share widened to 63 percent in August, while Yahoo dropped to 19.6 percent and Microsoft Corp (MSFT.O) slipped to 8.3 percent, according to comScore Inc.

Bob Liodice, president and CEO of the Association of National Advertisers, said his organisation was opposed to the pact. "We're gratified that Google and Yahoo are delaying," he said.

Google uses an algorithm that aims to match consumers with what it says are the most appropriate ads, a formula some advertisers find mysterious and bothersome.