Google pays out to Yahoo! but faces Gmail challenge

by Staff,, Brand Republic 11-Aug-04, 08:00

NEW YORK - Google has settled a patent lawsuit with Yahoo! by giving its one-time partner $300m in shares, a move likely to result in it reporting a loss in its first quarter as a public company.

In a day of bad news for Google, which is preparing to float in the next few weeks, the UK company Independent International Investment Research said it had brought in lawyers over the use of the name Gmail, to which it claims the rights.

Shane Smith, the chairman of IIIR, said at the company's annual meeting: "Our lawyers have been in contact with Google in relation to protection of our intellectual property in the trademark 'Gmail'. Our lawyers have emphasised our preference for an amicable solution and the dialogue continues."

Google's legal problems with Yahoo! stemmed from a patent lawsuit concerning the way Google links advertising to searches. Separately, Yahoo! had also claimed it was owed shares in Google because of a contract the two companies signed in 2000.

Although the settlement will remove one of the obstacles to Google's proposed $3.3bn initial public offering, it will mean the company will have to pay a one-off charge of as much as $290m.

If the company's flotation goes ahead, this could cause Google to post a loss in its first set of results. However, with investor concerns over the complexity of the IPO model and some institutional investors reportedly refusing to buy shares, there is doubt over when the company will float.

Separately, Jupiter Research forecast that the paid search market will be worth $5.5bn by 2009 because of a sharp rise in the cost per click from 29 cents last year to 47 cents.

However, Jupiter warned advertisers would be forced to focus on measurement and more intelligent bidding because the return on investment will fall as the price for paid-search advertising rises.

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