Israeli translation software provider Babylon saw its shares plunge more than 60 percent on Wednesday after an announcement that Google did not plan to renew a cooperation agreement between the two companies. The Internet advertisement revenue-sharing deal with Google, set to end November 30, was a major source of income for Babylon, accounting for 43% of its second-quarter revenue of $45 million. The shares had plummeted 62.3% by the end of trading after the company informed the Tel Aviv Stock Exchange that Google would not renew the deal. According to Babylon's management, the contract is not being renewed due to "complaints from a large number of Google Chrome users, who said that installing the company's tool bar detracts from their browsing experience, and this raised concerns at Google about its ability to enable a positive user experience." Babylon's stock price had already been suffering since the company announced last week that Yahoo, which provided 32% of revenue in the same period, had found faults in the way its own agreement was being handled. Babylon's directors met with representatives from Yahoo and the company later announced that it is not suspending its agreements with Yahoo. The company's controlling shareholder Noam Lanir lost about 135 million shekels ($38 million) on Wednesday. Babylon creates digital dictionaries in dozens of languages and had a market value close to NIS 1 billion ($284 million). However its revenue was largely dependent on agreements it had with Google and Yahoo. Babylon's shares fell 63% to NIS 7.33, lowering its market value to NIS 363 million ($103 million) from NIS 981 million on Tuesday. "We are still assessing the situation and examining the implications and the company's operation alternatives," CEO Alon Carmeli said in a statement to the Tel Aviv Stock Exchange. "It is too early to give one estimate or another on the full impact of the events and the course of action Babylon will choose to take," he said. "Something big has happened in the world of the Internet," Gilad Nachum, vice president of marketing and sales at Go Internet Marketing told Israel Hayom on Wednesday. The simple meaning is that the big players (like Google) have decided not just to pay lip service to the importance of a user's experience, but to take action and put a stop to activity that in their view detracts from that experience. Babylon went from being a company that offered a high-end product to being an Internet marketing company." In his view, Google has enough confidence in its alternatives to Babylon (like Google Translate) to terminate the contract.
Babylon shares plummet 62% after Google ends contract
Google: Babylon's toolbar diminishes the experience of Google Chrome users • Company chairman down $38 million • Internet marketing specialist: "Babylon went from being a company that offered a high-end product to being an Internet marketing company."
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