Microsoft, Yahoo Face In-Depth Review of Search-Engine Accord
Sept. 11 (Bloomberg) -- Microsoft Corp. and Yahoo! Inc. have been asked by the U.S. Justice Department for more details on a proposed Internet-search partnership, expanding the agency’s review of the agreement.
The request means regulators will do a more extensive examination, rather than approve the deal immediately. Microsoft predicted an in-depth review when the accord was announced in July, said company spokesman Jack Evans. He declined to comment on the contents of the request.
Over the course of the review, the companies expect to be asked about their search-engine investments, ad pricing and product plans, a person familiar with the matter said.
The outcome will shape the future of the market for Internet search ads, where Google has triple the U.S. sales of its two rivals. The companies may face more difficulty proving the deal won’t hurt competition as regulators step up oversight of the technology industry, said Michael Katz, a former chief economist in the Justice Department’s antitrust unit.
“The antitrust agencies are pretty skeptical of the argument that you need to be bigger to compete,” said Katz, now a professor at the University of California at Berkeley. “The Justice Department will respond, ‘Why can’t you get bigger by competing?’”
Under the partnership, signed in July, Yahoo will use Microsoft’s Bing search engine on its Web sites. Yahoo will sell ads that appear next to Web-search results, with the companies splitting the revenue.
Bing Investment
Even though the antitrust agency will scrutinize the deal closely, the companies probably can get it done as long as they do enough to persuade the Justice Department that the agreement doesn’t hurt competition, Katz said.
During the Justice Department’s review, Redmond, Washington-based Microsoft expects to be asked to disclose its spending on Bing to ensure the company made enough investments to create a viable product, the person familiar with the matter said. Both companies also anticipate regulators will ask for their individual search-engine product plans so it can assess whether there’s an incentive to compete more or less vigorously as a result of the deal.
“Those plans will help the DOJ understand what the competitive impacts of the merger might be,” said Greg Neppl, an antitrust lawyer at Foley & Lardner LLP in Washington. If the department were to find the accord hinders innovation, it could seek to block the deal.
Ad Pricing
The government will also seek information on how the companies’ online-ad auctions operate and what might happen to prices as a result of the combination, the person said. While regulators will investigate pricing, it’s unlikely that they will dictate what prices will be, the person said.
The requests will help the agency determine whether to impose conditions to foster competition, or block the deal. Mountain View, California-based Google scrapped plans to team up with Yahoo last year after the Justice Department threatened to sue, saying the proposal would have helped them “become collaborators rather than competitors.”
“Google was dominant a year ago and is dominant today,” said Brad Smith, Microsoft’s general counsel. “Even if this is approved, Google organic seo will be dominant a year from now -- but if this agreement is approved, at least there is a chance for a more credible No. 2 to emerge.”
Laura Sweeney, a spokeswoman for the Justice Department, said the agency is aware of the proposed Microsoft-Yahoo partnership, and declined to comment further.
Fully Cooperating
“Yahoo and Microsoft are cooperating fully with the Justice Department and firmly believe that the information they will be providing will confirm that this deal is not only good for both companies, but it is also good for advertisers, good for publishers and good for consumers,” Adam Grossberg, a Yahoo spokesman, said in an e-mail.
The companies are now responding to the latest request, which they received earlier this week, Microsoft’s Evans said yesterday. They still expect the deal to close on schedule.
Microsoft rose 22 cents to $25 yesterday in Nasdaq Stock Market trading. Sunnyvale, California-based Yahoo added 67 cents to $15.45, while Google advanced $6.97 to $470.94. Microsoft has risen 29 percent this year, compared with a 27 percent gain at Yahoo and a 53 percent jump for Google.
“There has traditionally been a lot of competition online, and our experience is that competition brings about great things for users,” Google spokesman Adam Kovacevich said in an e-mailed statement. “We’re interested to learn more about the deal.”
Of the three largest search engines, Google had 75 percent of search-ad spending in the U.S. last quarter, with the rest going to Microsoft and Yahoo, according to data from search-ad firm Efficient Frontier Inc. in Sunnyvale, California. The market should expand to $12 billion this year, according to New York researcher EMarketer Inc.
European Commission
In Europe, Microsoft is also likely to notify the European Commission about the agreement, said Neil Macehiter, a partner at Cambridge, England-based technology consultant Macehiter Ward-Dutton. If the commission gets involved, it will conduct an initial 25 working-day review, which can be extended by 90 days if the regulator has “serious doubts” about competition issues.
Last week, the Brussels-based commission put on hold Oracle Corp.’s $7.4 billion acquisition of Sun Microsystems Inc., saying its initial probe suggested the deal may reduce competition and lead to higher prices.
“I’d bet on Microsoft-Yahoo prevailing because it would be difficult for Microsoft to leverage its position,” Macehiter said.
Google Partnership
Microsoft objected to a proposed partnership between Yahoo and Google last year, saying the accord would allow them to fix prices. Now the software maker is on the other side of the same argument, and will likely tell the agency the venture won’t raise prices, said Andre Barlow, a Washington-based lawyer who worked for the Justice Department’s antitrust division and is now a partner at Doyle Barlow & Mazard PLLC.
Advertisers probably will face questions on the deal too. Carl Fremont, executive vice president at Digitas, an online ad agency, said a Microsoft-Yahoo combination would force Google to keep on improving its search engine.
“From a product offering side, I believe it will be better over time,” said Fremont, whose firm is owned by Paris-based Publicis Groupe SA. “It creates new competition in the market.”
Five US States Raise Objections To Google Settlement
By The Wall Street Journal
At least five state attorneys general have filed briefs raising concerns about Google Inc.'s (GOOG) proposed legal settlement with authors and publishers, adding to a wave of criticism lodged against the high-profile deal as it nears a public hearing.
Attorneys general from Missouri, Connecticut, Pennsylvania, Massachusetts and Washington have filed comments opposing the proposed settlement, arguing that its use of payments intended for copyright holders that can't be located is potentially unlawful.
In addition, Connecticut Attorney General Richard Blumenthal noted that his he is also interested in antitrust aspects of the deal.
A Google representative declined to comment.
Authors and publishers initially sued Google in federal court in New York in 2005, arguing that the Internet company was violating copyright by scanning and digitally publishing books without proper consent.
Under the terms of the settlement proposed late last year with the Authors Guild and Association of American Publishers, Google would pay $125 million, while earning the right to set up a vast, online trove of content. That's raised concerns among rivals and critics that Google will be handed too much influence over the nascent digital-books market.
Microsoft Corp. (MSFT) and Amazon.com Inc. (AMZN), among others, have criticized the settlement, as has the head of the U.S. Copyright Office.
A registry to be set up under the settlement would ultimately keep licensing payments intended for copyright holders that can't be located, after a certain number of years.
But in a brief filed jointly, the attorneys general of Pennsylvania, Massachusetts and Washington argue that such treatment of unclaimed payments would circumvent state unclaimed property laws, and could "constitute a misdemeanor which carries a penalty ranging from $1,000 to $10,000 and up to 12 months imprisonment."
Missouri Attorney General Chris Koster argued in his own legal brief that state law requires that "abandoned" property including the unclaimed payments be deposited with the state treasurer. Koster wrote that groups such as the American Society of Composers, Authors and Publishers regularly pay into state funds when copyright holders can't be found.
Connecticut's Blumenthal added that the settlement also appears to raise "objectionable issues" under antitrust and copyright laws. Connecticut's focus on the use of unclaimed payments to rights holders "should not be interpreted as assent or acceptance of any other feature of the settlement," the attorney general wrote.
The legal briefs filed by the attorneys general are among a number of last-minute arguments filed with the court prior to a "fairness hearing" scheduled for Oct. 7.
An opinion is also widely expected from the U.S. Justice Department about the antitrust aspects of the proposed settlement.
In an order filed Wednesday, U.S. District Judge Denny Chin wrote that the court has received "approximately four hundred submissions" related to the proposed settlement, both for and against it.
Chin wrote that due the number of submissions and "apparent public interest in the case," he is requiring that anyone who wishes to speak at the hearing submit a formal request by Sept. 21.
In testimony prepared for a Sept. 10 House Judiciary Committee hearing, Google Chief Legal Officer David Drummond argued that the settlement will expand public access to millions of books, while still providing copyright holders with proper compensation.
Microsoft-Yahoo Deal Draws Antitrust Scrutiny
By Information Week
Antitrust bodies in the U.S. and Europe are eyeing Microsoft (NSDQ: MSFT)'s search partnership with Internet portal Yahoo (NSDQ: YHOO) to ensure the deal doesn't run afoul of competition rules.
"As we said when the agreement was announced, we anticipated that this deal will be closely reviewed in the United States and EU, and discussions in both geographies continue," a Microsoft spokesman told the Reuters news agency Wednesday.
The spokesman said Microsoft remains confident that the deal will close sometime in 2010.
Microsoft and Yahoo struck a wide-ranging search partnership on July 29. Under the ten-year pact, Microsoft will place its Bing search engine on all Yahoo sites and, initially, keep 12% of the revenue from Yahoo-driven searches. Yahoo will handle sales and marketing for premium search ads for both its own properties and Microsoft's.
Microsoft is also committed to hire a minimum of 400 Yahoo employees on a full-time basis as it extends Bing to Yahoo's Web sites. It will also hire an additional 150 Yahoo workers to help with the transition.
Yahoo can terminate the arrangement if organic seo search traffic generated by the alliance falls below a specified percentage of Google's traffic. Yahoo also retains the right to expand the partnership by adding Microsoft's mapping and mobile search services to its Web properties.
Microsoft must submit to Yahoo copies of all data it collects from its sites while providing search services, according to an SEC filing.
Yahoo CEO Carol Bartz has said that, by in effect outsourcing search to Microsoft, her company can save $200 million in annual capital expenditures through reduced spending on search-related operations. The companies said it could take up to two years for them to fully implement their agreement.
How Will ReCAPTCHA Help Google?
By Channel Web
Those aggravating strings of nonsensical words you have to key into your computer when trying to send someone an e-mail or buy tickets online -- they're called CAPTCHAs -- are actually doing a job that Google (NSDQ:GOOG) finds pretty valuable. But in its zeal to teach computers to, in essence, "read," Google may be chipping away at the ability of CAPTCHAs to provide security.
Google will buy ReCAPTCHA, a company that provides CAPTCHAs to help protect more than 100,000 Web sites from spam and fraud. Financial terms were not disclosed.
CAPTCHAs (Completely Automated Public Turing Test To Tell Computers and Humans Apart) are often created from old pieces of text, including books and newspapers.
Computers, through programs called "spiders" or "robots," find it hard to recognize those words because the ink and paper have degraded over time. So far, CAPTCHA programs have been successful in deflecting robotic attacks because the spiders can't recognize the text.
But in addition, the technology can help Google in its large-scale -- and controversial -- text scanning projects such as Google Books and Google News Archive Search.
Google wants the technology because as users decipher the jumbled characters with CAPTCHAs, the software "learns" to interpret those words during organic seo searches.
The technology that Google now uses to scan documents, Optical Character Reader Recognition, stumbles over the translation of print that's faded and worn. ReCAPTCHA's Web site illustrates that accuracy problem.
Because ReCAPTCHA uses old text from old print publications and users then type them in as a CAPTCHA, users teach computers to read the scanned text. Having the text version of documents is beneficial because it facilitates searching and renders it easily on mobile devices. ReCAPTCHA's slogan, "Stop Spam. Read Books," seems to be a good fit with Google's plan.
Therein may lie the rub, however. As we teach computers to read, CAPTCHAs may lose their appeal as a security mechanism. Of course, as hackers' malicious software also becomes more sophisticated, the distorted character strategy would become threatened anyway. Google's next step may need to address that security concern.
Google Curtails Europe Book Plan
By The Wall Street Journal
Making concessions to European publishers, online-search giant Google Inc. Monday said it will remove all European books that are still commercially available from its $125 million program to scan orphaned and out-of-print books in the U.S. and sell them online.
The concessions come after concerns were voiced by European authors and publishers who don't want the company to scan books by European authors that are still protected by copyrights, without asking their permission.
The new position means books that are no longer available to U.S. consumers but are still on sale in Europe won't be included in Google's scanned catalogs, unless the author expressly wants to be included, Google said.
In the U.S., Google has reached a settlement with publishers that will allow it to scan and post online all out-of-copyright and out-of-print books, for which owners are hard to identify. Due to complex copyright rules, the U.S settlement will only apply to users in that country.
Previously, European rights holders whose books were out of print, or had never been published in the U.S., were considered to have opted for the scanning process.
It's a step in the right direction, [but] it's not enough for our members to sleep peacefully.
To alleviate European concerns, Google has also promised to have two non-U.S. representatives on the governing board of the Books Rights Registry, which is to govern the settlement. One of its jobs is to find authors for out-of-print books that are being scanned by Google, and redistribute any earnings coming through the book search. Books are orphaned if they are protected under copyright, but the rights holder is nearly impossible to identify.
Google decided to clarify its European position following complaints, especially from German publishers, that were concerned that their authors were being illegally scanned in the U.S. Several European publishing associations say they plan to send their objections to the U.S. District Court judge who is holding a hearing on the Google deal in New York in early October.
A lot of the European concerns had been already addressed in the U.S. settlement and the emphasis on rights-holder control should put minds at ease.
Microsoft Updates Bing with 'Visual Search' Feature
By PC World
Microsoft's Bing search engine is stepping up its assault on Google with the introduction of a unique beta search and shopping tool called Visual Search. The Visual Search feature offers an alternative to lists of blue links that are often delivered by search engines when researching cars, cameras, or other topics. Visual Search was announced Monday by Yusuf Mehdi, a senior vice president at Microsoft, at Tech Crunch 50, a tech conference being held in San Francisco.
Instead of displaying traditional lists of Web site search results Bing's Visual Search displays rows images of items that can be scrolled through via a slick interface. For example a search on Bing for handbags, Yoga poses, or movie showtimes will deliver traditional results. Now look to the left-hand side of your search resulst and you'll see a "Visualize" the search option. Clicking on this link takes you to the Visual Search page that allows you to scour images - not text links - to help you explore or winnow your search down fast. The tool also offers refinement options to narrow the number of images by criteria such as price, movie theater, or team (when searching for sports).
To preview Visual Search topics visit this Bing page which should be live by the time you read this.
Microsoft says Visual Search will be rolled into Bing over the next few weeks with some customers seeing it before others. By the end of September, it says, the feature will be live to all. The move comes as Microsoft has seen moderate success with Bing. Since its launch in May Microsoft`s Bing search market share in the U.S. grew slightly in July to 9 percent, according ComScore, a market research firm. Google owns 65 percent of the search market compared to Yahoo with 19 percent (Bing and Yahoo's combined market share is 27 percent).
Visual Search: Hands On
With the example of visually searching for cars I started out with 25 images appearing on my Web browser. Using a scroll bar on the right I was able to quickly scroll through hundreds of images of cars. When I hovered my mouse over a picture of a specific car a balloon popped up containing additional vehicle information. Click on the image and you are taken to Bing search results for the make and model of the car you were looking at.
Thanks to a slick user interface kicking virtual tires of cars is loads of fun, but what makes this technology really handy is its ability to winnow down you search. On the left-hand side are tools for narrowing the number of cars by 25 most popular, SUVs, or make and base price. Each time you select a preference the number images is reduced.
Unfortunately Visual Search significantly limited to 50 topics Microsoft has created Visual Search libraries for. That's right, there is no Bing engine that can create a Visual Search result on-the-fly for just any topic. Microsoft creates them specifically for what it says is popular search results. Search dinosaurs, Olympic sports, or laptops and no such Visual Search is offered.
I found this an addictive way to explore topics not limited to cars, but also politicians in office, MLB players, and dog breeds.
The number of topics Microsoft says it will expand to depends on how popular the feature is with Bing users.
Official: Book settlement makes 'mockery' of copyright law
By The San Fransisco Chronicle
Google's proposed book settlement with book authors and publishers, allowing the company to digitize and sell millions of books, makes a "mockery" of copyright protections in the U.S. Constitution, the head of the U.S. Copyright Office said Thursday.
The Google book settlement, the subject of a court hearing next month, allows Google to scan out-of-print books without permission from copyright owners, creating a sort of compulsory license, said Marybeth Peters, register of copyrights at the U.S. Copyright Office. The settlement "allows Google to continue to scan millions of books into the future and permits Google to engage in a number of activities ... that are indisputably acts of copyright infringement," Peters told the U.S. House of Representatives Judiciary Committee.
The settlement seeks to circumvent "full public debate" and Congress' authority to change copyright law by allowing Google new rights for digital books, she added.
"The settlement would alter the landscape of copyright law, for millions and millions of rights holders of out-of-print books," Peters said. "It would flip copyright on its head by allowing Google to engage in extensive new uses without the consent of the copyright owner -- in my view, making a mockery of Article One of the Constitution, that anticipates that authors shall be granted exclusive rights."
A hearing on the settlement is scheduled for Oct. 7 in the U.S. District Court for the Southern District of New York. In October, after three years of negotiations, Google, the Authors Guild and the Association of American Publishers announced a settlement of lawsuits filed against Google after it began scanning books without copyright owners' permission.
Google has scanned about 10 million books and has begun offering access to books with its Google Books product.
Representatives of Google, the Authors Guild and the National Federation of the Blind defended the book deal, saying it will give the public access to millions of out-of-print and so-called orphaned books. Orphaned books are those for which no one claims copyright, and the settlement sets up an independent book registry that will seek to find the owners of orphaned works.
Blind people will gain access to digitized versions of books, which can be run through text-to-speech software, advocates said. Disadvantaged students across the U.S. will have access to books now only available in the world's greatest libraries, added David Balto, a senior fellow at the Center for American Progress and a former antitrust attorney with the U.S. Department of Justice and the U.S. Federal Trade Commission.
Lawmakers generally praised the settlement. The settlement represents "one of the most innovative developments" since the printing press, said Representative John Conyers, a Michigan Democrat and chairman of the committee.
But critics said the settlement gives Google an unfair advantage by allowing it blanket access to most books. The settlement rewards Google for scanning first without asking authors and publishers for permission, said Paul Misener, vice president of global policy at Amazon.com.
Amazon has scanned about 3 million books, Misener said. "The difference is, and probably the only significant difference between their book-scanning project and ours, is we first sought permission from the rights holders," he said. "We went to the rights holders, and one by one, negotiated deals ... to be allowed, legally, to scan these books."
The settlement releases Google from liability for any past and future copyright infringement, giving the company a huge advantage over competitors, Misener said.
The settlement would give Google an "unlawful and inappropriate" monopoly and strips away the rights of copyright holders worldwide, added John Simpson, a consumer advocate with Consumer Watchdog. "The deal simply furthers the relatively narrow agenda of Google, the Authors Guild and the Association of American Publishers," he said.
But David Drummond, Google's chief legal officer, told lawmakers that none of the benefits negotiated in the settlement are exclusive to Google. Any other company can negotiate the same deal, he said.
Drummond also told the committee that Google will expand retailer access to books scanned and sold by the company. Google has already committed to allow retailers access to sell in-print books scanned by Google, but on Wednesday, he announced that Google would expand that program to out-of-print books covered by the settlement. Amazon.com and other retailers will be able to sell those books and get part of Google's revenue share, he said.
"We're willing to put our money where our mouth is," Drummond said. "We believe strongly in an open and competitive market for digital books. Google will host the digital books online, and retailers such as Amazon, Barnes & Noble or your local bookstore will be able to sell access to users on any Internet-connected device they choose."
