It was just last week when we advised that Yahoo! was made to justify their search ad deal with Google. This time its Google turn, by going on the defensive with the release of a study from SearchIgnite. The study predicts the Google/Yahoo! search ad deal will increase keyword prices for advertisers by 22%.

Google’s chief economist Hal Varian said on the Google Publicity Policy Blog that there are flawed assumptions in the report and the methodology used is questionable.

“After taking a close look at the study, I believe it makes several flawed assumptions and uses questionable methodology. The paper suggests that advertisers will be getting the same performance from the same ads, just at higher prices. We believe that advertisers will be getting significantly better performance at prices that reflect that improved performance.”

“Google doesn’t set advertising prices — advertisers do. Prices must reflect how much a sale is worth to an advertiser, and that will continue to be the case after our agreement with Yahoo! is implemented.”

If you are interested in reading the report from SearchIgnite, then click here to download a copy.

It seems that this deal is becoming increasingly harder for Google & Yahoo! to “sell” and I wonder if there are just too many factors which in the end will see it fall apart. Let us know what you think by leaving a comment below.

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