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What Exactly Did Jerry Yang Say

Kim Hart

One of the most interesting parts of the Senate hearing yesterday, which examined the proposed search-advertising deal between Yahoo and Google, was a short scuffle over a comment reportedly made by Jerry Yang, Yahoo chief executive, at a meeting last month with Microsoft executives.

Brad Smith, Microsoft general counsel, recounted a meeting at which Yang said that the Internet search market had two poles -- Google makes up one pole and Yahoo and Microsoft make up the other. Any search advertising deal would pull Yahoo to Google's pole, freezing Microsoft out of the market.

Sen. Herb Kohl, (D-Wis.), chairman of the Senate Antitrust Subcommittee, said such a charge was "pretty explosive stuff." Sen. Arlen Specter, (R-Penn.) pointed out that Michael Callahan, Yahoo general counsel, had not contradicted Smith's claim. Callahan said he disagreed with Smith's "characterization" of the comment. When Specter pressed him on whether Yang had made the comment, Callahan said he couldn't recall.

This sparked a flurry of reminders from the panel to the tech executives that they were under oath. Smith said he stood by his testimony and said the comment made a "very strong impression" on Microsoft executives, especially Steve Ballmer.

The senators vowed to follow up on this issue and promised their staffs would continue to gather information on whether a partnership between Google and Yahoo would be anti-competitive.

The Justice Department and several state attorney generals are investigating the deal.

In a note to investors today, Stifel Nicolaus analyst Blair Levin said they doubted a disputed comment by an executive to be a huge factor, but "we believe it would prove troubling to investigators if the reported Yang sentiment is reflected in Yahoo-Google internal documents."

They added: "The flap reinforces our belief that Yahoo and Google have some convincing to do."

By Kim Hart  |  July 16, 2008; 5:21 PM ET  | Category:  Kim Hart
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Both Google and Yahoo currently feature sponsored ads for illegal drugs. Search "poppers". Sale and distribution in the US banned by law, effective 1991. Promotion of poppers is a public health challenge because poppers use by gay men is associated with risky sex and published research finds poppers use a driver of HIV transmission. MSN stopped the sponsored ads after complaints and education. Google stopped after SF Dept. of Public Health AIDS Office complained several months ago, but has since resumed the sponsored ads. Last Nov. 2007, Google, Yahoo, and MSN were fined nearly $30 million for listing illegal gambling sites. Apparently another fine is needed to get them to cease profiting off of sponsored ads for illegal drugs. Google and Yahoo have been unresponsive to this issue to date. Their bigness apparently makes them impervious to law. Maybe the Dept. of Justice should include ceasing advertising illegal drugs as part of any deal with these giants.

Posted by: Hank Wilson | July 16, 2008 9:02 PM

Let's have Jerry Yang say it. This is second hand info which creates confusion and gossip. Just put Jerry Yang on the stand. I have been using Yahoo and Google for a long time and it serves me well. I have bought computers with Microsoft too. We have a free market economy and let's treat it that way.

Posted by: Michael Deguzman | July 21, 2008 8:02 AM

Fire yang and let Mr. Ican do what he does BEST. make money!!!

Posted by: carl | July 21, 2008 9:10 AM

From what little I've read, Icahn has made a career of these events, and the long term benefits to the companies has been of little help. Perhaps it is much to do about Icahn Microsoft and little to do with other investors.

Yahoo is more confusing to use than in the past, I would think they should pay attention to the basics rather than the merger and/or takeover.

Posted by: Goldfields | July 21, 2008 9:55 AM

How "free" is the market? What competitors does Microsoft have? For that matter, for search, what competitors do Google and Yahoo! have? This vaunted "free market" fails just as frequently as it succeeds. And in Europe - old protectionist, socialist, slow growth, tight credit Europe - the Euro is doing just fine, and no real estate or credit markets collapse, thank you.

Posted by: Disgruntled in CA | July 21, 2008 12:12 PM

Been over there recently? There is a housing bubble -- in parts of Spain at least, and I suspect elsewhere along the Mediterranean. At least in the places I visited (parts of Spain, Britain) the cost of living is higher, the wages haven't kept up with it so they can buy less than we can.

Posted by: Anonymous | July 21, 2008 1:18 PM

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