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.