Google Says State Quashed Ad Agency Bid

Google said Thursday that its bid to buy a Russian advertising agency was rejected by the Federal Anti-Monopoly Service.

"We're very disappointed," said Alla Zabrovskaya, a spokeswoman for Google in Russia. Google will decide what steps to take after reviewing the ruling, she said.

Google bid for Begun, a unit of search-engine operator Rambler Media, in July. The purchase would violate competition laws, the service said Thursday.

The acquisition would have boosted Google's share of Internet advertising in Russia, the last European market where it lags behind a local provider, said Olesya Vlasova, a telecoms and media analyst at UralSib.

"The government urged support for Russian Internet resources and said strategic assets shouldn't be sold cheaply into foreign hands," Vlasova said. "Yandex and Rambler are losing ground as Internet users switch to Google."

Google agreed to buy Begun, which sells search and contextual text-based advertising services, for $140 million in July. Rambler, controlled by billionaire Vladimir Potanin's Prof-Media holding company, would have gained about $50 million after all costs associated with the transaction.

At the same time, Rambler signed an agreement to use Google's contextual and search advertising technology on its web site in exchange for displaying Google ads next to search results.

Rambler's press office declined to comment immediately on the ruling.