Google And Yahoo Revise Deal To Get Government Approval

Trying to push through their search advertising deal, Google and Yahoo have revised the terms of the deal to satisfy antitrust objections by the Department of Justice, reports the WSJ (article behind the pay wall). The main concessions are putting 25 percent cap on the search-related revenues that Yahoo can generate from the partnership and making it a two-year deal instead of a ten-year deal.

Putting a revenue cap on the deal goes a long way towards limiting the monopoly factor because Google will only be able to take a quarter of Yahoo’s search-advertising business instead of all of it. As Michael has wrote a couple weeks ago:

A cap means Yahoo can only rely on Google to a point, and if the cap is small enough then Yahoo will be forced to continue to invest in their own search business, so it removes a lot of the meat behind our objections.

The original deal was non-exclusive and was expected to bring in $800 million in additional revenues to Yahoo. There was also an escape clause in case of an antitrust lawsuit or if a minimum revenue threshold is not met. A 25 percent cap on search revenues would cut that $800 million in half.

But maybe this is just a stalling tactic until a new Presidential administration and new Justice Department officials come into office. Would the Google-Yahoo deal do better under an Obama or a McCain administration? Google CEO Eric Schmidt’s endorsement of Obama will not be forgotten—by either side.