|If you cannot face an enemy, become his ally. That's exactly what Yahoo is trying to do. If the recent rumours are to be believed, Yahoo might give up its paid search advertising to partner with Google to do it for them. It is a deja vu of sorts for Yahoo who had snapped their partnership with Google years back to start their own search engine. |
Why's Yahoo doing this?
In fact, this is one of the cleverer decisions from Yahoo's point of view. Adwords IS the most dominant of online advertising programs and YPN has always come way behind Adwords in competition. This step will help Yahoo boost up its numbers. Let me take hypothetical numbers to explain this: Suppose I need to advertise on both Adwords and YPN. Because Adwords is huge, and I also have more people bidding on my keyword here, I might be bidding at $10 for my keyword, while at YPN, due to lesser competition, I might only pay $5. So, simplifying the calculations, Yahoo might make only $5 at the max from this advertising.
Now, Yahoo is a huge site by itself. So, Google shall give Yahoo a much better deal than it would to any other Adsense partner. So, now with Google ads on Yahoo, Yahoo might just make $6 or $7 from the earlier $5. It is a better deal considering they are also not taking care of the ads inventory and the related cost now.
Why it's going to affect me?
1. Google Monopoly
Google is already a clear market leader in this segment. Now with Yahoo partnering Google, it shall move into a much higher reach. As an advertiser, I might just not find the right variety of options to choose. Google still has competition, but then this partership will always mean more dominance.
2. Possible Ad-Price increase
For a moment, let us assume the advertisers at YPN to be mutually exclusive to their Adwords counterparts. With this partnership in place, the YPN advertisers have to move to one of the other existing options. If not Google, they will be moving to others like Microsoft adCenter. Eitherways, peer-competitios is going to increase amongst advertisers on each of these ad networks. Since in all these networks, pricing is based on bids, increasing competition means more pressure towards a price increase. Definitely not something I would want.
3. Potential increase in partnerships for Google
Point 2 suggests that Google could actually be increasing its profit margin per click with this partnership in place. This also means as an Adsense publisher, I might stand to get more earnings per click. That stands not just for ordinary publishers, but to the other big websites too. Probably Digg might get back to Google now!. This shall give more dominance to Google, which might shoot the prices further.
As you see, it is clearly going to create many more partnerships in Google's favour. As I see now, it is going to be a nice thing to happen for an Adsense publisher. But if you want to advertise, it is going to be all the more harder!
Labels: Business Model Analysis
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