Earlier today, Google and Yahoo announced they are going to put their awaited agreement/business deal on hold for the near future to allow the Department of Justice to review the deal. The deal would have done two main things: one, outsourced Yahoo’s SEM advertising to Google, and two, give Yahoo a mountain of (needed) cash. Some estimate the deal would be upwards of $1 billion per year for Yahoo.
Some are against the deal, claiming that it would create a near monopoly on search ads for Google and increase the overall cost of search engine advertising. Both points are essentially wrong.
First, does it create a near monopoly for search ads?
Yes and no. It would mean upwards of 90% of all search ads would be run through Google’s paid advertising platform. But it doesn’t quite make it monopoly. Yes, I am splitting hairs a bit here, but follow me for a moment.
When Microsoft reached near-monopoly status, it did so by purchasing other companies to put them out of business. They absorbed the other companies into the hive-mind that is Microsoft and the former brand ceased to exist. Some part of the technology the other company might show up as a feature in a Microsoft product, but let’s face it, they closed the market with their massive checkbook.
In this case, Google is not looking to absorb Yahoo or shut it down. It’s simply going to feed text ads into Yahoo for related searches. People that use Yahoo now will still use Yahoo and may not even notice a big difference, outside of an "Ads by Google" tick that will likely be shown somewhere on the page. User will not be directed away from Yahoo.
Also consider that one reason Google wants to do this is to make sure Microsoft can’t get their hands on Yahoo.
Based on that, I don’t think that reaches monopoly status fears.
Second, will this rise advertising costs for search engine ads?
Ad rates may increase, but not because of this deal. Ad rates are determined by how many advertisers are bidding on keywords, not by the engines themselves. Advertisers that bid in both engines sometimes see lower prices in Yahoo for some terms if the term happens to have lower competition. But advertisers have to spend extra time managing ads in two different platforms. Honestly, it’s a small art form (and sometimes frustrating) to keep campaigns in different engines aligned. Having it all run from one platform will save time and frustration for advertisers and agencies that run campaigns for clients. Agencies often have to invest in either a platform like Acquisio, or build some home brew version to manage the strain. Getting ride of some of that would be a huge bonus to the process of online advertising.
The main reason I would like to see this deal happen is simple: panama sucked. Panama was the code name Yahoo gave to the project that was to overhaul and revamp their ad platform. They knew their platform was not as easy to use as Google and was not as powerful. Simple things like running reports was tedious. So they started Panama.
Quite frankly, even though Yahoo knew what was wrong, Panama took way too long and probably cost Yahoo too much money, to rebuild a system that is still not as good as they AdWords system. And the kicker is, they knew what needed fixing but still didn’t quite get there.
I’m not saying Google isn’t becoming a monopoly. Quite frankly, I do think they are loosing their focus. (What were they smoking when they built Google Lively, yet another online virtual world???) But this deal makes sense and I hope the DoJ doesn’t block this.
Tagged as:
Google,
Search,
Yahoo
