Yahoo Japan to use Google’s search engine, advertising technology

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Yahoo Japan to use Google search engine technology

TOKYO — Yahoo Japan Corp. said Tuesday it will use Google technology to run its search engine and search ad delivery system, after a similar deal in the U.S. was derailed by regulators concerned about a monopoly.

The decision by Yahoo Japan, which is largely independent from its California namesake, will mean that the bulk of Internet searches done in Japan will use Google’s search engine, though both companies said enough independence would be maintained to keep the market competitive.

Sunnyvale-based Yahoo Inc., looking to cut costs as it lagged behind Google, dropped its own search service and adopted technology from rival Microsoft Corp.’s Bing search engine, in a deal that was approved earlier this year by U.S. and European regulators after a seven-month review.

A proposed partnership between Yahoo and Google in the U.S. fell apart last year after the Justice Department threatened to sue to block it on antitrust grounds. The Japanese Fair Trade Commission has traditionally been seen as more lenient than its U.S. counterpart, although it has ruled against Microsoft for violating anti-monopoly laws in its contracts.

Google currently dominates the lucrative Internet search market worldwide, which generates income by charging advertisers to display links along with search results. Few companies have the technology, user base and funds required to compete in search, and the shrinking number of players has raised concerns about privacy and fair competition.

Japan had the third largest Internet-using population in the world in 2008 behind the U.S. and China, according to the Foreign Ministry, with about 96 million users. A government study last year projected the market for search-related ads accessed from PCs would increase 27 percent over the next three years to about 200 billion yen ($2.3 billion).

Yahoo Japan said Tuesday it had consulted with Japan’s Fair Trade Commission before the deal was announced, though specifics of the agreement were still being worked out. Google Vice President Daniel Alegre said in a statement that customer and cost information would not be shared.

In Japan, the two companies accounted for over 80 percent of total searches in June, according to figures from measurement service Nielsen/NetRatings, with Yahoo Japan alone totaling about 50 percent. Unlike in the U.S. and other locations, Yahoo is a major Internet presence in Japan across a variety of online businesses, including search, auction and shopping.

Yahoo Japan said it had considered various search engines and ad delivery systems, and determined Google’s was the best for the Japanese market. It said the initial deal was for two years, which would be automatically extended for another two years if it didn’t object.

As part of the deal, Google’s Japanese search engine will get access to data from Yahoo Japan’s Internet properties, including its popular auction and shopping sites.

Yahoo Japan previously licensed Google’s search technology for a stretch between 2001 and 2004.

Yahoo Japan is a subsidiary of Softbank Corp., a major domestic Internet and mobile phone provider, which also has exclusive rights to sell the iPhone in the country. Softbank has about a 40 percent share in Yahoo Japan, while U.S.-based Yahoo Inc. maintains a 35 percent share.

Yahoo’s shares rose 1.2 percent in Tokyo during Tuesday trade. The announcement came after the market closed, but reports that a deal was imminent surfaced during the day.