We Can't Afford a Search Monopoly, Even If It Kills Yahoo 13 comments
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Yahoo (YHOO) and Google (GOOG) aren’t holding anything back in their effort to win our hearts minds in the search marketing war. Or rather, Yahoo’s surrender in that war as they prepare to include Google Adsense ads in their search results.
They had what amounted to an advertorial in the New York Times earlier this week. Google wrote not one but two blog posts on the matter, and launched a whole website with their side of the story. And yesterday Yahoo President Sue Decker weighed in with a long blog post, with all the same arguments.
Microsoft (MSFT), hoping to kill the deal, hasn’t been sitting quietly. They’ve got their own websites and have been lobbying the government for months to oppose the deal.
The deal allows but does not obligate Yahoo to place Google ads on their site instead of its own. Google and Yahoo stress that Yahoo is committed to keeping its own robust advertising platform to ensure long term competitiveness.
But the test results showed just how dramatically Yahoo can increase cash flow with Google ads. The more Google ads are shown, the more money Yahoo makes. And in a world where all that really matters is the financial results in your next fiscal quarter, the incentive to use more rather than fewer Google ads will be too large of a temptation.
Yahoo will be able to fine tune its financial results simply by turning up the volume on Google ads vs. its own. Every time they do that they mortgage their future because they give more network power to Google’s ad system (advertisers want volume and will pay a premium for it). In other words, Yahoo will be making constant cost benefit decisions weighing short term cash flow vs. long term competitiveness. Human nature and simple financial market psychology tells us unequivocally that cash will win and Yahoo’s ad network will lose.
Yahoo’s ad network will continue to erode further as they choose cash over competitiveness, creating a vicious downward cycle. As the fiscal quarters march relentlessly on, Yahoo will rely more and more on Google to make their revenue and earnings numbers.
There are three players in search today. In the long run the 80/20 rule is likely kick in unless a monopoly emerges. Microsoft needs to be that 20% player to keep the Internet healthy, just as AMD keeps Intel’s processor prices in check even though they don’t have much actual market share.
But if Google gets Yahoo, Microsoft won’t be able to be that counterbalance. And then Google will be free to charge monopoly prices to advertisers and share next to nothing of that revenue with publishers.
That’s why killing this deal is so important. It’s not about the share price of Google, Yahoo or Microsoft. It’s about maintaining a healthy Internet ecosystem that continues to let entrepreneurialism bloom.
My position on this has been steady since Microsoft first bid for Yahoo early this year. It’s destroyed my relationship with (the execs that remain at) Yahoo, and the chill is palpable during my few visits to Yahoo HQ these days. I can live with that, but what I don’t want to live with is an Internet where all the advertising revenue goes to one company. That sounds too much like the Windows/Office world of the 90s to me.
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This article has 13 comments:
only 40 % in yahoo's control...
if it executes good strategic plans...then may be saved
A study run by Yahoo and ComScore entitled “Close the Loop: Understanding Search and Display Synergy,” "found that when combined, search and display advertising deliver profoundly better results than when used independently. The study showed a significant lift in onsite engagement and an increase in online and offline purchasing by consumers who are exposed to integrated campaigns that employ both types of online advertising."
Another study run by Atlas (a Microsoft Company) found "When marketers supplement search with display impressions, they get a significant lift in conversions. Unfortunately, most advertisers that run both search and display are unaware of this...” The study demonstrated that "users exposed to both search and display ads convert at a higher rate: an average of 22 percent better than search alone and 400 percent better than display only."
Yahoo undestands the value of search because of the powerful combination it has with display (which is Yahoo's bread and butter). This is why Apt will be such a strong product. Once display gets going on Apt, search will be rolled onto the platform allowing advertisers to easily buy and sell display and search nder one roof.
For more information about the studies above, you can visit: mattlillig.blogspot.co...
MSFT has no clue what strategy works...DIY, buy YHOO etc?
So guess what, we already have a GOOG dominance....doesnt matter what this deal does or not.
Buy GOOG and atleast benefit from this.
Vastly superior products made Apple what it is today. MSFT's investment was largely a "gesture"-- and it turned out to be perhaps their most profitable investment during that period.
As for GOOG/YHOO: I don't see any predatory behavior going on (e.g. paying MSN searchers to switch to Google for the purpose of hurting MSN); thus, I don't see any compelling reason why the Feds should get involved in this.
How much did you get paid from msft? btw.
My understanding is that Google doesn't set the prices that advertisers pay. That is done by the advertisers themselves when they bid on keywords.
Of course, if advertisers have more places to go to bid on keywords, that might affect the volume of activity that Google gets and that could ease the upward pressure, somewhat, in the bidding.
Then it becomes a question of who has the better product. Oops, Google wins again.
So many of us long time ebay sellers have large customer bases which could substantially increase traffic on yahoos website and search engine.
It is an online service committed to local deals or bargain on products and services.