Microsoft outcry as Yahoo Japan picks Google as search partner

Yahoo Japan will continue to manage its own search page and search service. Yahoo Japan will also continue to run its advertising marketplace independent of Google.

Microsoft condemned the deal and said it would result in Google gaining nearly complete control over search and search advertising in Japan through contract, not organic growth.

The announcement comes one year after Yahoo and Microsoft announced a 10-year search deal under which Microsoft will power Yahoo's search site while Yahoo will manage the sales force for both companies' premium search advertisers.

Referencing the Yahoo-Microsoft deal, Yahoo Japan said it examined several search engines and ad platform technologies, but ultimately decided that "Google has developed what we believe is the best-performing search engine and ads platform technology for the Japanese language environment."

Microsoft made an unsolicited bid for Yahoo in February 2008, but after much back and forth, a bid for Yahoo's search business, and a proxy bid for Yahoo by billionaire investor Carl Icahn, a combined Microsoft-Yahoo never came to fruition.

Google later announced a non-exclusive agreement with Yahoo that would have allowed the Internet company access to Google's AdSense for search and content advertising programs in the U.S. and Canada. Regulatory scrutiny, however, later prompted the companies to scrap the deal.

Yahoo Japan denied this. "Yahoo Japan and Google will continue to compete with each other in all service areas including their advertising and search services," the company said in a statement.

Yahoo Japan said the value of its search service "will stay at a high level" if it uses Google's services. Improved search will also increase the value of other Yahoo Japan services, the company said.

Yahoo Japan and Google have not yet determined a timeline for when the deal will be put into place.

Yahoo Japan is jointly owned by Yahoo and Softbank. Yahoo Japan said the Google deal "will have no change" on other business areas, "including Yahoo's equity ownership in Yahoo Japan."

Dave Heiner, vice president and deputy general counsel at Microsoft, said Tuesday that the Yahoo Japan-Google deal is "even worse" than the failed Google-Yahoo 2008 deal.

"Today Google accounts for about 51 percent of paid search advertising in Japan. Yahoo Japan accounts for 47 percent. Their combined share of natural search results is almost as high," Heiner wrote in a blog post. "If Google is permitted to proceed with its plan, it would gain nearly complete control over search and search advertising in Japan through contract, not organic growth. Google alone would decide what consumers in Japan will find, or not find, on the Web. And Google will obtain massive amounts of data regarding the search history and Web sites visited by every consumer, business and government agency that conducts Web searches."

Heiner said the attempted Google-Yahoo match-up "was not nearly so far-reaching."

"Less than two years later Google has entered into a deal that would turn its only major competitor in Japan into a collaborator, rather than a competitor, across natural search results and advertising," Heiner concluded. "In doing so, Google has engineered a transaction that, once again, would deprive its search rivals of needed search query scale."

Google did not immediately respond to a request for comment.