Saturday, May 17, 2008
Google May Bail Out of Yahoo Ad Deal
It looks like Google might be thinking about bailing out of an 'adsourcing' deal with Yahoo! Inc. Here's the background info on the Google-Yahoo ad deal, and here's the latest on the MS-Yahoo-Icahn deal. Ok, now that you're upto speed, let me explain why Google is getting cold feet.
First, the only reason Google agreed to do it was to try and help Yahoo fight off the advances by Microsoft. Since Microsoft has now withdrawn from the offer (at least on paper), the basic reason for Google having to help Yahoo is no longer there.
Secondly, buried at the bottom in this WSJ report is a statement that people at Google are worried about Google having to share advertising related data with Yahoo, which Yahoo could then use to ramp up its own ad serving system to a level comparable with Google, which would have the end result of not only making the ad deal redundant, but also be a threat to Google's long term dominance. Especially if Microsoft, at a later date, manages to get its hands on a refurbished Yahoo all kitted out with Google's ad system. What more could MS ask for, if it gets its hands on a Yahoo which has already acquired Google's search ad serving capabilities?
Third, what Yahoo will likely do is outsource its most difficult and underperforming keywords to Google. As in those which do not produce revenue. That's logical. After all, if a keyword is already producing revenue comparable to what the same keyword generates for Google, then there's no reason to outsource it. Yahoo can gain only by bringing in Google to boost revenues for search queries which are not performing well. Which also means that Google gets saddled with the black sheep, while Yahoo gets all the stars.
Also, as we have discussed extensively before, Google is already in danger of becoming a target for anti-trust regulators. Add to it Yahoo's slice of the search pie, and that's like asking for trouble. Anyway you slice it, considering all of the above, the one and only reason for Google to deliberately take on this mess would have been to prevent Microsoft from taking over Yahoo. Unless that situation becomes imminent again, Google will not go ahead with this ad deal.
Which could be one of the reasons Yahoo has started working on ramping up its own advertising platforms, like the WPP Group PLC deal it inked on Friday. Details from CNNMoney. Three of WPP Group's divisions, GroupM, 24/7 Real Media and WPP Digital, will work with the Internet search engine pioneer to give their advertising customers more Web options. 24/7 Real Media, a digital marketing company, will develop a proprietary media trading platform that will connect to Yahoo's Right Media Exchange, an online advertising exchange that links publishers with advertisers.
Ironically, everyone involved - Ballmer, Yang and Eric Schimdt - are, I think, slightly relieved that the MS-Yahoo deal fell through, because the deal carried such high negatives for all three companies. For the record, I still think Microsoft will get their hands on Yahoo, but that's a different matter. As things stand now, Yahoo! Inc. is on its own here.
First, the only reason Google agreed to do it was to try and help Yahoo fight off the advances by Microsoft. Since Microsoft has now withdrawn from the offer (at least on paper), the basic reason for Google having to help Yahoo is no longer there.
Secondly, buried at the bottom in this WSJ report is a statement that people at Google are worried about Google having to share advertising related data with Yahoo, which Yahoo could then use to ramp up its own ad serving system to a level comparable with Google, which would have the end result of not only making the ad deal redundant, but also be a threat to Google's long term dominance. Especially if Microsoft, at a later date, manages to get its hands on a refurbished Yahoo all kitted out with Google's ad system. What more could MS ask for, if it gets its hands on a Yahoo which has already acquired Google's search ad serving capabilities?
Third, what Yahoo will likely do is outsource its most difficult and underperforming keywords to Google. As in those which do not produce revenue. That's logical. After all, if a keyword is already producing revenue comparable to what the same keyword generates for Google, then there's no reason to outsource it. Yahoo can gain only by bringing in Google to boost revenues for search queries which are not performing well. Which also means that Google gets saddled with the black sheep, while Yahoo gets all the stars.
Also, as we have discussed extensively before, Google is already in danger of becoming a target for anti-trust regulators. Add to it Yahoo's slice of the search pie, and that's like asking for trouble. Anyway you slice it, considering all of the above, the one and only reason for Google to deliberately take on this mess would have been to prevent Microsoft from taking over Yahoo. Unless that situation becomes imminent again, Google will not go ahead with this ad deal.
Which could be one of the reasons Yahoo has started working on ramping up its own advertising platforms, like the WPP Group PLC deal it inked on Friday. Details from CNNMoney. Three of WPP Group's divisions, GroupM, 24/7 Real Media and WPP Digital, will work with the Internet search engine pioneer to give their advertising customers more Web options. 24/7 Real Media, a digital marketing company, will develop a proprietary media trading platform that will connect to Yahoo's Right Media Exchange, an online advertising exchange that links publishers with advertisers.
Ironically, everyone involved - Ballmer, Yang and Eric Schimdt - are, I think, slightly relieved that the MS-Yahoo deal fell through, because the deal carried such high negatives for all three companies. For the record, I still think Microsoft will get their hands on Yahoo, but that's a different matter. As things stand now, Yahoo! Inc. is on its own here.
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