Yahoo and Google Search Advertising Agreement
Yahoo and Google have official contract on the table, awaiting Congressional hearing. Under the the agreement, Yahoo will serve Google advertisements along search results. Yahoo is not required to serve any number of Google ads, which in effect allow Yahoo to continue it search business.
Read reluctant public document
Cnet Report | Search Engine Land Report | Reuters Report
What Jerry Yang Saw
As a founder of Yahoo, Jerry has emotional attachment to the company. Growing it from a garage project to a billion dollar enterprise… hell, I’d be attached too. In the past 6 months he did everything in his power to keep the company from Microsoft.
In Jerry’s vision(and I am speculating), Google-Yahoo deal will buy Yahoo time. It will satisfy shareholders, with projected $250 million to $450 million per year and give Yahooers less hostile environment to work on Panama and hopefully come back as a Google-free, competitive company. I think Jerry’s vision is to keep Yahoo as a major player in search, a competitor to Google, Microsoft and other search engines.
The problem with this is Google’s almost “monopoly” status in search. Recent Hitwise report gives Google 70% share (though Hitwise always gives Google more than Comscore and Nielsen). There’s also a lot of rant in the media on Google reaching 90%-100% very soon. Google already owns most corporate ad accounts and is an advertiser of choice for small businesses. Yahoo’s agreement in effect weakens overall perception of Yahoo in the advertising world, which in turn halts revenue flow to Panama.
Yahoo may become too Google dependant, like Ask.com
Jerry’s initiative to save the company and stage a come back to online ad space, when the stars align, is a big shot.
To gain more ad dollars, Yahoo needs to up the search market share and with unstoppable, tank-like Google it’s hard. Yahoo needs Comscore, Hitwise and Nielsen to report Yahoo search share gain, instead of decline, which is now a routine for Yahoo and Microsoft. Without search share, even state of the art ad platform is worthless.
This brings the shareholder paradox.
The dollar hungry, often greedy shareholders want money and want it now. If the long term strategy results in short term losses, but promises long term prosperity, how do you convince shareholders to take $1, $2, $20 million dollar plunges, without stone carved guarantees?
Yet long term, focused strategy is what Yahoo needs. It needs more users to say “Yahoo it” instead of “Google it” and this can come only through focus on search technology and innovative products that build larger mind share throughout the world.
Google is now the savior from Microsoft, but it will be the guy that puts a bullet into Yahoo’s head in the end, and other search engines for that matter.
We’ll be left with Google at 90%+ monopoly status and Microsoft with 3%, beating it’s head against the wall.
Yahoo Revenues Flat | Yahoo Rumored to Cut Staff | Google 70% July Hitwise
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