With an antitrust investigation brewing over its advertising deal with Yahoo, Google is going on the offensive in trying to answer its critics and push the deal through. CEO Eric Schmidt told reporters yesterday that all the scrutiny is being orchestrated by Microsoft and that Google plans on going ahead with the deal anyway.
Last week, Google’s chief economist Hal Varian gutted a study that claimed a Yahoo-Google advertising alliance will result in a 22 percent increase in advertising rates. And today, Google’s advertising chief Tim Armstrong reiterated some of Varian’s points in an attempt to dispel the notion that the advertising deal with Yahoo will raise prices. From Armstrong’s post on the Google Public Policy Blog:
Question: Will the Google-Yahoo! agreement raise ad prices?
Answer: Neither Google nor Yahoo! set ad prices. Ads are priced by an auction where an advertiser only bids what an ad is worth to them.Question: Can Yahoo! pick whose ads to show based on who has the highest price?
Answer: No. Under the terms of our agreement Yahoo! won’t be able to see the current auction prices for Google ads, and Google won’t be able to see Yahoo!’s prices.
Obviously, if Yahoo thinks it can make an additional $800 million in advertising revenues from the deal, that extra money is coming from somewhere. Probably in the form of increased prices. Google is trying to deflect that by saying that it doesn’t set prices, advertisers do. The end result will be the same. Whether it will be 22 percent or something else, prices on that Yahoo inventory will go up.
The second point is also a bit disingenuous. Although Yahoo won’t be able to see Google’s auction prices before deciding which ad spots to hand over, it already knows which ads are performing poorly on its own network. And it no doubt will be doing bucket testing of ads to be able to compare how much they fetch on Google and how much they fetch on Yahoo’s ad system. So while the difference in pricing won’t be completely transparent to Yahoo at the instant when the ads are served, Yahoo will be able to glean this information over time on its own.
Armstrong promises another post tomorrow that promises to deal with some of the anti-competitive concerns being raised. Google already addressed some of these during a Congressional hearing in July. But Google cannot let up now if it wants this deal to go through. Even if it is willing to put up with an antitrust investigation, Yahoo might not be, and can kill the deal on those grounds.
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I love google, but if they’re too big it could web startups.
I love Mixergy, but that comment did not make sense.
Did you mean to throw in a “hurt” in there? Or something else?
Haha. “it could web startups”.
Maybe web is used as a verb. Web, as a verb, means to entrap or ensnare. Google can buy more (ensnare) more start ups because of its size. Maybe not.
Google will put this behind them and laugh later as predicted
Google Profit Optimization at work.
As a professional search engine marketer who also works with lots of small businesses who set up pay-per-click campaigns, I might be able to offer some insight.
Many, perhaps even most companies only set up ads in Google AdWords and fewer also do Yahoo and even fewer also do MSN Adcenter, because it takes the same amount of time and reaches fewer people. As a result, the bid prices tend to be less on Yahoo and MSN as there are less advertisers bidding against eachother. As a result, the bid prices on Yahoo are usually about 50% - 100% lower than they are on Google for what we have seen.
Really, some combination-agreement where it’s like an MLS would probably be ideal for advertisers as well as other search engines instead of a Google-Monopoly.
Sorry — that should read “As a result, the bid prices on Yahoo are usually about 25% - 50% lower than they are on Google for what we have seen.”
All this anti-trust investigation… won’t matter anyway.
Ultimately Google-Yahoo deal will happen and Yahoo will price the ads at increased rates…that’s it…
what think microsoft of this?….any idea
Yahoo’s extra money will come from more clicks (better placement and more ads impressions). It does not necessarily come from the increase in bid price of the ads.
The problem with the deal isn’t only about the price of the ads. I’m more worried about the future of the industry under Googopoly.
if this deal goes through, we’re completely screwed as a country. It will tell us the federal can be outright bought and that clear-cut monopolies are “legal”.
Please meet my frenemies: Cable and Telco
Anti-trust laws are bogus and should be repealed. Microsoft has proven that even the most monopoly-like looking company can’t control everything. And ultimately, no one is required to buy any company’s services. It is a shame that Google has to explain anything.
I dont quite understand Fremer logic, if the deal is really closed, the economic theory tells me that prices would go higher, since now 2 players will be somewhat merged into 1, so less offer, higher prices…
Am i missing something?
Google is trapping Yahoo
let google do what they want.
they know what is best for us.
just spread your cheeks and accept them.
/sarcasm
Google plans to kill yahoo slowly as it knows it can’t acquire it
Many people are afraid of that Google will turn into this monopoly but yet most of us, when posed with a question, we type into our browser, google.com. Yes, I will admit Google is getting big but it is their innovative products, such as Google Chrome, that Google is able to get so big. I am not a big technology person but I see no problem with Google. Whether some like it or not, Google will be an integral part of our jobs in the future and if somebody doesn’t like it well…there is always Ask.com.
As a company that spends 85% of our online budget with google I am amazed that anyone but Microsoft would object. I would welcome the ability to run my google campaigns on Yahoo, hell I would hope google could serve Microsoft’s ads too!
The real issue is the tool-set for creating, managing, targeting and tracking campaingns. Yahoo blew it when they launched their last system, it’s difficult to use and requires so much more work for mediocre results. They don’t deliver the impressions or click through. MSN is even more difficult to work with for even less compelling results.
It would be nice to pay less for Yahoo and MSN customer acquisitions but I would rather pay more for effective campaigns that create results. I would hope Yahoo could remain independent but theyhave a long way to go to make creating and managing campaigns easy, Microsoft might do it with another few billion$ worth of attempts - they use to copy things so well when they ripped the Mac OS…why not copy google, i bet bill and jerry could get an Adwords account.
Unless you use all of these systems you might think of the argument simply being around media and placement but what google has always done better than anyone is usability an rsults. Except for that crapp spreadsheet program they are hawking as part of google docs.