Our agreement to provide ad technology to Yahoo!

Posted by Omid Kordestani, Senior VP, Global Sales and Business Development

Today, we announced a non-exclusive advertising agreement that will provide Yahoo! with access to our AdSense for search and AdSense for content advertising programs on their U.S. and Canadian web properties. In addition, we will work to enable interoperability between our respective instant messaging services allowing users better, broader communication online.

We are proud of the advertising technologies we have built, which show users a relevant ad whether they are searching for a specific item or browsing the internet. This arrangement extends those benefits to Yahoo! and its many users, advertisers and publisher partners. We currently provide similar services to sites like AOL and Ask.com as well as many other partners, and we work closely with all of our partners to ensure that our partnership drives their long term success.

Why did we make this agreement? Quite simply, we think it is good for users, advertisers and publishers. By offering Google's industry-leading technology to Yahoo!, the whole system becomes more efficient, and everyone benefits:

• Consumers will see more relevant ads when they are looking for information and browsing the web. And with interoperability between IM services, users will have easier access to even more of their contacts.
  

• Publishers currently in the Yahoo! Publisher Network will benefit from Google's advertising technology, potentially increasing the revenue they earn from their sites.

• Advertisers will have new ways to reach their target customers online more efficiently.
  

We also think this is good for competition. The truth is, this kind of arrangement is commonplace in many industries, and it doesn't foreclose robust competition. Toyota sells its hybrid technology to General Motors, even though they are the number one and number two car manufacturers globally. Canon provides laser printer engines for HP, despite also competing in the broader laser printer market. Google and Yahoo will continue to be vigorous competitors, and that competition will help fuel innovation that is good for users.

It is important to say what this agreement is not:

• This is not a merger. Rather, we are merely providing access to our advertising technology to Yahoo! through our AdSense program.
  
  
• This does not remove a competitor from the playing field. Yahoo! will remain in the business of search and content advertising, which gives the company a continued incentive to keep improving and innovating. Even during this agreement, Yahoo! can use our technology as much or as little as it chooses.
  
  
• This does not prevent Yahoo! from making similar arrangements with others. This arrangement is not exclusive, meaning that Yahoo! could enter into similar arrangements with other companies.
  
  
• This does not increase Google's share of search traffic. Yahoo! will continue to run its own search engine and advertising programs, and the agreement will not increase Google's share of search traffic.
  
  
• This does not let Google raise prices for advertisers. Google does not set the prices manually for ads; rather, advertisers themselves determine prices through an ongoing competitive auction. We have found over years of research that an auction is by far the most efficient way to price search advertising and have no intention of changing that.
  

We have been in contact with regulators about this arrangement, and we expect to work closely with them to answer their questions about the transaction. Ultimately we believe that the efficiencies of this agreement will help preserve competition.

The Internet is a healthy, competitive environment where content creators, advertisers and users come together to access information, communicate and create new business opportunities. We think this deal extends these benefits -- it's good for users, advertisers and publishers and good for the industry.