Yahoo Japan will launch a search service using Google's search and advertising technology by the end of this year, but the Japanese online shopping company, Rakuten, asked the country's anti-monopoly watchdog, Japan Fair Trade Commission, to review the partnership.
The Yahoo Japan and Google partnership announced in July means a two-year contract with options to renew. The company announced the news along with first-quarter fiscal earnings. It means about 80% of the Japanese search queries would run through Google -- a blow to Microsoft, which expects to complete its U.S. and Canadian search alliance with Yahoo by the end of October.
Yahoo Inc. owns 35% of Yahoo Japan, but mobile phone and Internet service provider Softbank owns a 40% majority stake. When Yahoo reported third-quarter earnings on Tuesday, the company said as of Sept. 30, the pre-tax value of its 35% stake in Yahoo Japan and 29% indirect stake in Alibaba.com generated roughly $10 billion or approximately $7.74 per share. The figures, based on public market quotes, do not include estimates of the value of Alibaba Group's privately held businesses.
"It's not unusual to find that competitors in one country are partners in another," says eMarketer Analyst David Hallerman. "It's surprising for some, but it shouldn't be."
Yahoo Japan owns more than 50% share of the Japanese Internet search market, and Google around 40%, according to the Associated Press, citing the Japanese research firm Video Research Interactive.
Microsoft called the deal anti-competitive. In a statement at the time of the announcement, Microsoft General Counsel Brad Smith said the 2008 deal would lock up 90% of paid-search advertising, giving Google virtually 100% of all searches in Japan. He called the deal more anticompetitive than Google's deal with Yahoo in the United States and Canada, which the Department of Justice found illegal.
Eddie Smith, chief revenue officer at real-time search engine Topsy, says Yahoo Japan probably considered a unique set of economics from a cost and a revenue perspective when making the decision to go with Google rather than Bing.
Smith can't quite figure out why Yahoo Japan chose either Bing or Google, because neither supports a strong enough social search service for Japan's users. "The use for Twitter in Japan is two to four times more than what you see in the U.S.," he says. "Regardless of the search provider they plug into Japan, they have a huge blind spot when it comes to bringing in real-time search."
Twitter spokesperson Matt Graves told MediaPost the number of Twitter users In Japan has increased more than 5 times since January, and overall engagement has increased even more.