Google addresses antitrust issue on Yahoo ad deal

Update 3:10 p.m. PT: I added more quotations from the Google executives

MOUNTAIN VIEW, Calif.--Google's top executives on Thursday gave a glimpse into how it might try to deflect antitrust concerns of a possible ad-sharing deal with rival Yahoo, advising observers to look at the overall ad market.

"You are narrowly focused on search advertising," co-founder Sergey Brin told reporters at the company's headquarters here before Google's shareholder meeting. "Advertising as a whole is much broader, and Internet advertising is much broader."

The observation has bearing on the issue of whether Google has a monopoly and whether a deal with a rival would therefore reduce competition.

"Advertisers always have multiple choices. It makes sense (for advertisers) to always use more than one," Chief Executive Eric Schmidt added. "It's incorrect to assert there's lock-in or opportunity for dominance in the ad space. Don't map (computer) platform economics to ad economics."

Schmidt wouldn't comment on whether a deal was imminent, but one source familiar with the situation expects an announcement next week.

Co-founder Larry Page also specifically said Yahoo is "strong" in the display ad market. Google's cash comes chiefly from text ads in the form of AdWords, which appear alongside search results, and AdSense, which appear on partners' Web pages; its acquisition of DoubleClick, though, is designed to improve its display-ad business.

When Yahoo and Google announced a two-week test under which Yahoo showed a limited number of Google text ads alongside search results, Microsoft raised antitrust concerns. The partnership also was a major factor in Microsoft's displeasure with Yahoo acquisition talks.

Yahoo-Google ad test a success
The two-week test with Yahoo went well, Brin said.

"We had a really good dynamic. We were able to implement it quickly. The technology teams got along well. They were able to get the protocols working very easily and able to gain a lot of insights," Brin said.

Page also discussed another issue that could come up in antitrust scrutiny, whether customers--in this case advertisers--benefit or are harmed by the partnership. During the test, Page said advertisers contacted him when they saw their ads showing up on Yahoo's search results.

"They were really excited about that," Page said. He added. "AdWords is an auction. We're not setting prices. Auctions are determined by supply and demand. Having more inventory avail to advertisers is really positive for them."

Criticizing Microsoft
Many have noted the irony that Microsoft is raising antitrust concerns. The famously aggressive company was largely unscathed by a years-long antitrust case involving whether it leveraged an operating system monopoly to dominate the Web browser market.

Page struck back at Microsoft's antitrust criticisms, pointing specifically to the company's MSN Internet portal.

"A lot of the traffic to MSN has come through bundling the operating system and the browser," Page said. Bundling is one of those hot-button words in antitrust

"When Microsoft pounced after Yahoo's earnings (report) with their letter, we issued blog post," Schmidt added. "Given Microsoft's history and the extreme market share that would result in some end-user-facing parts of the Internet, we were concerned. We were opposed to (Microsoft's attempt to acquire Yahoo) on that basis."

A helping hand for Yahoo
So perhaps it's not surprising also that Google wanted to help Yahoo withstand Microsoft's acquisition attempt.

"We really believe in companies having choices about their destiny. Certainly a (Silicon) valley company like Yahoo--we want to support their ability to have choice," Brin said. "They were under hostile attack and we want to make sure they have as many options as possible."

Schmidt sees Microsoft as a formidable competitor. "Microsoft is well funded, they're clever they're smart, and they have a number of advantages nobody else does," he said.