Google vs. The United States of America

The US Department of Justice has hired a noted antitrust expert to examine Google’s pending take-over of Yahoo!’s paid search advertising program. Slated to start in October, the hail-Mary plan to keep Yahoo!’s assets out of Microsoft’s hands comes into effect. Google AdWords will display some of its ad-inventory over its former competitor’s networks, a move which potentially gives Google over 90% of all search ad-spend.

Several Justice Department lawyers spent the better part of the summer gathering information about the partnership between the two search giants with their efforts intensifying in the weeks following Yahoo!’s annual general meeting in early August.

On Monday, the Justice Department hired veteran anti-trust lawyer Sanford M. Litvack to study the evidence and prepare the case. Litvack was Assistant Attorney General in charge of the DOJ Antitrust Division during the Carter Administration.

Earlier this week, the Association of National Advertisers made a statement asking the Justice Department to stop the partnership. The American Association of Advertising Agencies and the International Advertising Associaton also oppose the deal. The investigation is said to be limited to a narrow focus on the PPC partnership and will not involve other online advertising channels such as display or CPA.

Two and a half months ago, Google agreed to wait until October 1 before starting to serve ads across Yahoo!’s network in order to give the DOJ time to study and approve the deal. Earlier this month, Google CEO Eric Schmidt said Google was moving forward in October regardless of government approval.

For Yahoo!, losing this deal could be another critical body-blow. Yahoo! is relying on the Google advertising partnership to provide up to $450million in revenues in 2009. It’s share-values are hovering leagues below the $31/share offered by Microsoft in January at approximately $18.75/share. A blockage in the cash flow could put the company in play again (guaranteeing at least six more months of misery).

Search marketers generally oppose the Google / Yahoo! advertising partnership because it will likely serve to limit competition in the advertising marketplace. At the same time, search marketers were generally happy to see the eight month drama surrounding the second largest search engine and ad-network subside and might be more supportive of the deal if only we knew exactly what to expect as an outcome. Antitrust procedings can run for years.