The impact of the Yahoo Microsoft Search Deal on Google, SEMs and Advertisers
Last week I talked about how the Yahoo-Microsoft deal impacted the two partners in the deal. Now let’s look at others in the space, starting with the obvious:
This deal is a short term blessing for Google. While Microsoft and Yahoo focus on integrating, Google can double down and invest in innovation in display, search, and the convergence of the two. While people don’t normally think of Google and Display together, they have been investing heavily in search for years, even before the Doubleclick acquisition.
The timing of these distractions could not be better as just this month Google is expected to launch version 2.0 of the DoubleClick AdExchange. This launch comes at a time when the exchanges of the other big players are not exactly knocking the ball out of the park. Yahoo’s Right Media Exchange is starting to feel a bit stale with little new development over the last year, transparency remaining a problem, and no real gameplan for real time bidding. Microsoft’s AdECN remains dormant pending an expected Q4 relaunch with nothing particularly unique to offer besides access to MSN inventory (and even that may not be unique). Add to this the distractions of integrating the search deal and the door appears wide open for Google to take a giant step forward in the non-premium display market.
As for Display/Search convergence specifically, Google should be able to capitalize on it’s commanding share in search to invest heavily in making display and search work together. A recent whitepaper by Google is likely just one of the first of many efforts to push the market into thinking this way. But it’s more than just thinking, it’s the tools and capabilities. With AdX2 bringing experience display advertisers to GCN, the traditional search advertisers that have dominated GCN to date will need to utilize and master the tools and techniques that make display work. As just one example,search advertisers on GCN are used to evaluating performance based solely on click-based conversions. For traditional display advertisers, view based conversions are almost always the driving force in making display hit ROI goals. As Google continues to integrate Doubleclick into Google’s stacks, it would seem like a pretty obvious step to incorporate view-based conversions into Google’s Adwords conversion tracking (I’d be shocked if there wasn’t a Google engineering team working on just this right now). This tool alone will encourage search advertisers to reevaluate how display and search interact.
SEMs
Anything that impacts the big 3 in search impacts Search Engine Marketing firms. Commentary from experienced SEM’s I know as well as reports I’ve read indicate SEMs think the deal is good for them and will spur innovation in search both by Microsoft and Google. I think it could do even more than just spur search innovation. SEM’s are already starting to enter display and, as I mentioned above, they will need to master new tools and techniques to compete in Google’s content network against experienced display buyers. While this will be challenging, and some will fail, it will drive a new wave of innovation within the SEM industry resulting in leading SEM firms becoming masters of both display and search. This will blur the lines between SEMs and traditional digital agencies and will not just redistribute but also grow the pie as greater performance drives allocation of more spend to digital as a whole.
Advertisers
Focusing specifically on display and search convergence, this deal should really benefit advertisers of all sizes, and I believe this will be driven primarily by a maniacally driven Google. Over the last year, Google has had a number of public failures (TV advertising, radio advertising) and needs a win outside of search or risk being labeled a one-trick pony (albeit a very good trick). The complementary nature of search and display, the window of opportunity provided by distracted competitors, and the existence of all the tools necessary to put it together, will drive Google to invest heavily in making search and display work together and assure a leadership position in both for Google. This all has to benefit advertisers. Many advertisers have either never thought of buying display or just didn’t have the tools to manage it effectively. Innovations by Google (here’s one) and its competitors will enable advertisers of all sizes to try display and to successfully make it work.
Overall, I think the Yahoo-Microsoft deal will benefit all these players in the market. In my prior post, I said that the deal will benefit convergence as a whole and would benefit Yahoo more than Microsoft. Do I think it’s good for everyone? Not exactly. Over the next 12 months, this deal benefits Google more than either Yahoo or Microsoft. In the long term, it’s too early to pick one winner, but the innovation and increased competition brought about by a larger #2 search platform and all three leading internet companies focused on making search and display work together can only benefit display/search convergence.
Finally, you may notice I didn’t mention ad networks – critical players in display. I doubt the deal will impact networks much, if at all. Ad networks don’t do much directly with search, and the impact on display will relate more to the competive balance between the big three. That said, I do believe the launch of AdX2 and continued innovation in the exchange world are major strategic threats to ad networks as a whole. How they need to react to it is best left for another day.
