Randall Stross at The New York Times goes to bat for the Google/Yahoo search marketing deal, saying there’s “nothing to fear” from the two companies linking their search products. I believe most of his analysis is wrong, and he also skips the publisher side of the market entirely. In short, I feel that he is exactly wrong in both his approach and his conclusions.
He begins with “GOOGLE controls about 70 percent of the search advertising market. Doesn’t that give it a monopolist’s ability to set prices as high as it wishes?”
Well no actually, a monopoly controls only the supply side of a transaction, so it can’t change whatever it wants. If prices go too high, users stop buying (this is known as demand elasticity). Being a monopoly just gives you the ability to charge much higher prices than you otherwise would be able to because you don’t have a competitor who can undercut you for less profit.
But Stross skips that analysis and jumps into the meat of his argument. Ad rates are set by auctions, not dictated by Google, he says, so Google has no control over the pricing of those ads. If ad rates go up, it is just the market doing its thing.
This is the focus of his article - saying that there may not be any ad rate increases (which is absurd on its face), and alternately saying that if the rates increase it is simply the market responding to more robust ad auctions.
At the end of the day, advertisers will pay only what they want to get the ads they need. Most advertisers closely track ad performance to return on investment. If bids go up, they step back.
The real long term win for the networks is to build a commercial relationship directly with advertisers. Google has far more of them, because they’re chasing the massive search page views that Google supplies them. The more advertisers bidding, the higher the price.
With the addition of Yahoo search queries, there will be even more inventory, and even more incentive for those advertisers to jump on the Google platform.
So one centralized marketplace equals the highest economic rent to Google, which they can then share with third parties.
And that’s the big piece of the puzzle that Stross ignored. In May I wrote about the very real impact that a single search marketing provider will have on the rest of the companies in the Internet ecosystem, which tap into those networks for revenue.
On the publisher side things are even worse. Google doesn’t share enough revenue with content sites that show their ads. The only thing keeping them even close to honest is the fact that Yahoo and Microsoft will occasionally compete for those partners. Take that away, and Google will go back to keeping the majority of advertising revenue generated at those sites (their only competition will be other types of advertising, which generate far less revenue). That is a terrible outcome when you look at it from the perspective of the health of the Internet.
Microsoft can’t ignore the online advertising market, it’s just too big and important. And we need to be behind them in this effort, because if Microsoft and Yahoo lose interest, we’ll be stuck with a monopoly, and the Internet will suffer. Competition drives innovation. Competition drives prices down. To wish this away is irresponsible.
Those third party companies (like MySpace, Facebook, Digg, Ask, AOL and now Yahoo) are at the long term mercy of Google when their first agreements come up for renegotiation. Google may give Yahoo most of the revenue today from Google ads, but in ten years when Google is the only player in town, look for the terms to move towards a more standard Monopolistic model. Today Google is kept in check via competitive deals where Microsoft or Yahoo are willing to actually lose money to win away the partner from Google, and get control of those search queries.
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Microsoft should offer a better deal to yahoo for this search ads asap or else they will be the biggest sufferers as google is obviously going to gain in the long run from this deal.
Note : Typo in the 7th para @ build a commercial realationship > relationship
@amit: thanks for including the picture - now we know what a total idiot looks and sounds like.
tech crunch is now removing comments. does this mean its over. if your gonna delete a comment it must be just. tell the commenter wtf.
my comment was fully relevant, thoughtful, informational and sincere.
there are final destination natural language location sites that will put gaggle and yahope to sleep.
http://professionallocator.nin.....ideo%3A321
maybe this tc discrimination censorship is to kiss ass to gaggle and yahope.
what gives? not the tc i know.
TruthLocator.com
Locator dude, TC is bashing google in this post. How could they also be kissing the arse?
Youre just computer illiterate, and you think web directories are the way of the future.
Say I want to find a dentist, go to dentistlocator.com? Nope, it isnt yours and it is an ad arbitrage site. It has to be consistent to work, and it needs artificial intelligence instead of you manually adding relevant links (or you compete with mahalo.com).
How does your business scale?
in simple words, the deal will not go through the anti-trust hurdle. And yahoo will break the $15 barrier.
bhawani you are a f****** a*******
yahoo gets pimped by its own patent 361(addense). when this pact is complete google will officially be yahoos sugar Daddy.
in 10 years gagggle as we know it wont be around. Gaggle and addense do not support innovation. they are mumbo jumbo spit out results just like there search engine algorithim. 10 years google will be like going to a public library to do research for school. savvy consumer and business professionals will go to strategic niche vertical location based domain properties. Natural Language Location Engines will Rule the Planet.
http://www.vator.tv/pitch/show/MyLocatorcom
http://www.killerstartups.com/.....or-network
Google is even singing the values of adding location to search. http://www.youtube.com/watch?v......ning.com/
MyLocator.com- Search Solved
I agree. What a douche.
Note: Typo a******* > a******
And you are a f****** s** o* a b****
computer illiterate? your a jackass/corn flake. compare me with mohahope(mohalo), you got to be kidding.
DentalLocator.com and DentistryLocator.com link fine, im not hard to find. or dentist.MyLocator.com you personal custom location engine.
No alogirthim can compete with a natural language 1200+ multichannel natural language network.
I can scale by having the most creative strategic multichannel location engine network ever created. how do you scale computer genius? wheres your location on the information superhighway?
share with the community some substance instead of lip service, a link to your computer literate website, your full name……….something . oh i forgot you dont scale, you just flake.
LostLocator.com
good staff for sure
mike…
once again… a f*ed up analysis that you pass off as something of critical thought!!
just because you have more people advertising on google, doesn’t mean that you’re going to have advertising rates go up… you might have more people advertising, but only have the same number of successful ads as you would have had with the current group of advertisers. just because more people go out for the football team, doesn’t mean i get a better team. i might, or i might not. a number of factors enter into this kind of scenario.
as far as what google pays a publisher, vs what a publisher pays. this, i would imagine is going to be driven by the ability of a publisher to actually show that they/their site, has the ability to convince actual customers to the business behind the ad. if i as the owner of an ad, can get more actual customers, then i don’t really care what site shows my ad. in fact, if you can demonstrate to me in a quantifiable/actual/real manner that you do more/better than other sites, then i might place ads with you directly, removing the middle guy completely. google has very little control in this part of the equation.
is google powerful, sure. no argument here. are they something to be feared, not really. all google really is, is an effective middle man. there’s nothing to stop someone else from coming up with a more effective mouse trap, to serve ads, or to draw customers to a given vendor’s website.
i would posit that a strong component for the future of advertising will have an advertising model that doesn’t tie search/advertising together… build this, and you rip google’s heart out.
peace..
Obviously you do not know what you are talking about. It can be mathmetically proven that having more bidders in an auction drives prices up. That was one of the keys to eBay’s success (higher winning bids = more revenue). Besides, Google already charges the highest cost per click (on average) in PPC advertising.
the football analogy doesn’t really make sense b/c not all the players can play. If you allowed 21 players on the field the would probably very well win by overwhelming the other smaller team.
Google’s PPC ad costs are higher than MSFT’s or Yahoo’s for our keywords right now (by a significant amount) so I assume this means that more people on the field (bidding) are driving prices up in the auction. Either that, or Google is just charging more. Either way we pay more for the same keywords (but overall we get more traffic too).
foo
Google is no doubt the Big Daddy when it comes to search marketing. Microsoft, Yahoo, AOL, et al needs to rethink theirs strategies. If they don’t the day won’t be far when Google will be the only player.
More power to you Mike. I’m glad this was pushed as quickly as possible to balance the NYT story that’s got lots of traction
I caught a couple more typos.
paragraph 3 “be able too* because”
paragraph 5 “and alter*ately saying”
paragraph 7 “closely tract* ad performance”
scruff at the bottom
“briefly mentions the “monopoly” word but swishes it aside by describing these ad markets as
In the article,”
haha, yes prices set by auction. Except it seems when you attach a CPA price then your advert prices rise inexplicably whereas a seperate campaign stays the same price. Almost as if by yourself telling google how much each conversion costs it gives them the knowledge to raise prices as they know you can take it.
Well, the thing is, Yahoo has good reason to believe this deal is good for it. So by *not* allowing this deal to go through, Yahoo loses out, is less able to compete with Google, and Google’s hold on the online ad market improves.
So it would seem that both avenues in fact help Google improve its position. It is far from clear to me which of them is better for keeping the market competitive, there are reasonable arguments both ways. So while we can probably all agree that competition is good, it is hard to say how best to foster such competition.
Yahoo has to do what it can to remain a competitive force.
This takes money, to hire Developers and continue offering free Web apps.
If Yahoo feels it is in their best financial interest to partner with Google, we should respect their needs and interests.
By not doing so, we may indirectly accelerating their demise.
In other words, this is THEIR decision taking to account all the short term and long term pros and cons
geezz.. how about reading the article before posting??
i agree with what you say but a little proofreading would boost your credibility.
It sounds scary. It is always a problem when we have a monopoly in the market. It can have dire ramifications. A monopolistic Google is something that everyone should fear about
typo in 2nd last para “earch => search”
Facebook/digg/myspace/yahoo at the mercy of Google? No, cutting out the middleman is always an option. Techcrunch cuts out a middleman with its sponsors.
Adsense will only be king until a site thinks they can make more money by not making their own system. The risk/cost of making their own system is should be more than the amount of money that they get through a deal.
Also, focusing on a search engine as a revenue stream is something that is old hat. The crome omnibar and firefox both function as searches without page impressions for google. Some print/tv advertising now takes advantage of this. Keywords are coming back and the whole searchengine/domainname experience is on its way out.
Google isn’t in trouble if their search page drops in usage either. Adsense is just embedded search dressed up as advertising.
Here’s a concrete example of how, despite the auction system, Google just raised the price of search ads:
http://adwords.blogspot.com/20.....-live.html
They bury the real news as the last item of this post to make it less obvious and talk about minor details in the title.
Long story short:
Currently, Google lists min bid for each keyword. This is the amount enough to get on the *last* page of ads. They will stop doing that, and will start listing the amount enough to get on the *first* page of ads.
People who want it cheap will likely keep bidding based on this “minimum”. For competitive keywords (those with more than one page of ads), the minimum will be higher. This means that first-page results will be more expensive for advertisers without any increase in quality of visitors or other benefits.
How much worse? We’ll see very soon, unfortunately. Most of the increase will be at the bottom of the first page, but some of the hike will percolate up to the first and second positions.
The effect will kick in not on the first day, because it’ll take time for people to see the new higher minimum and adjust their bids.
Advertisers already find Google CPC high, and some will, indeed, leave or reduce spending. I presume Google’s price studies have to show that total spending will increase, or they would not be raising the price.
They are not increasing their price across the board, just for those with shitty conversions. If you have little value to add, you are not serving the user, and they want to price you out of the auction.
Bottom line: You quit trying to offer crappy uncompetitive products or services, and you will be fine. No value advertisers will be forced out, and I thank Google for that.
If you want to strengthen your argument, give us a real-world example of the key word you are bidding for, the cost increase you have seen, and the service or product you are actually advertising. All three of these matter.
Right… the Internet will suffer…
Let me provide you with a simple translation of this post…
http://the-anti-google-baloney.....me-me.html
Keep it coming Alex, I completely agree (with most of your modest blog’s posts). If, at some point, someone can find definitive proof of abuse of power on the part of Google, I would have no problem saying so, however.
Not having “skin in the game”, I’m better positioned than any large publisher or search advertiser to be objective on this topic
@Alex Apparently you must not understand how the Internet has evolved over the years. Competition and advertising dollars have been the driving force behind the Internet and innovation.
Google has been abusing their power on both Google Adsense and Adwords products…there is absolutely no transparency. Try looking up Adwords Quality Score. Companies and individuals are complaining for good reasons. Take out Yahoo/MSN out of the equation and the only place with substantial search traffic is Google. You expect me to believe that a company that has to answer to stock holders won’t try to squeeze an extra dollar here and there.
Plus, Tech Crunch doesn’t even need Google at this point, I would suspect most of it’s traffic is not even search anymore…Google Adsense won’t even come close to paying their hosting costs.
You are talking about 2 separate things here:
1) How TC gets traffic- word of mouth, twitter, friendfeed, techmeme, washpost, google reader, digg, slshdot
2) Re: adwords (aka how TC monetizes traffic)- they dont use adwords, they use FM ala openads plus direct sales plus “text ads”
Google, though beholden to stock holders has a long term interest shared with the user, and they understand that. they are doing everything they can for free to hold onto that user trust.
You are totally biased and illogical.
that is ture that msn should buy yahoo otherwise if Google buys yahoo than forget about internet market, Google may finish live. or msn by controlling market.
@PR:
That presumes Yahoo chairman and board know what they are doing and have a REAL plan (beyond just “run from MS any way possible”). I’m not convinced either is the case!
Like it or not, the only real counter to a Google online ad monopoly is at least ONE strong competitor. Yahoo has so far not shown an ability to keep up, so it needs to either team or get bought by someone OTHER than Google.
Remember the fiasco with comScore about how Google was showing fewer ads on their search results? That was because Google *WAS* setting floor pricing on ads…there were a lot of people who wanted to advertise and could not unless they paid the price Google wanted.
Too bad the shill at the NYT skipped over doing research before writing his story.
Happy to have helped wrt typos. You can declutter and delete my comment now if you like.
i like how you asked to have a comment deleted to declutter the comments, by writing another comment….genius.
The Google Lobbyist who wrote that article skips over one huge fact of which he must be aware - Yahoo prices rise in this deal because advertisers cannot bid for Yahoo inventory separately. They must instead bid for the quality and value of keywords on Google and then get part of their purchase in lower-value Yahoo inventory. What if you got change at the grocery story half in US Dollars and half in Mexican Pesos? Would your prices be going up? Yes.
This plus the fact that they completely control pricing via Minimum Bids, makes the article a farce. Surprise that the author has a new book coming out on Google and all their awesomeness.
This coming from a blogger trying to sell something. You are not worth a crap if you don’t understand how to run an adwords campaign. Who cares if the traffic comes from yahoo or gogle, as long as they come to your site and make a purchase.
But if the google traffic is worth the price, and 25% of your spend comes from Yahoo clicks that are not worth the price, and you cannot opt-out of those, what you gonna do? Pay Google probably. That’s the problem.
While it’s true how Google is monopolizing the market, but I also recall each and every time I wanted to try another competitive service. AdBrite, Yahoo, Microsoft, Facebook. They all end up more expensive, don’t have global coverage, can’t support all languages, and worst, they don’t even convert very well.
That was at least in my case. So if Google is feeding Ads to Yahoo, yes I’m up for it.
More than hurting the advertisers, the Yahoo/Google deal will squeeze the money made by the publishers. If Yahoo paid more to their publishers, they would suddenly have a whole lot more inventory to sell. Of course, there isn’t THAT much demand for that inventory in comparison to google, but that’s been covered in many other posts.
Webmob-ad, is a new start-up that just came out . It is a pioneer in the automation of mobile and web advertsing by creating the only self serve and fully automated marketplace for CPC and CPM advertising . It supports all types text ads, banners and video ads.For publishers , it offers the highest split of earnings you can find out there and much more. It caters to web and mobile Publishers and Advertisers . Web and Mobile Publishers can earn money easier than ever and registering is FREE. Please check it out : http://www.webmob-ad.com. We would like to hear your comments , please drop us a line .
Perfect example is this spammer. If they could get all the search terms they wanted, they would be happy to provide ad arbitrage.
Here’s to the worthless pieces of crap that try to get you to their site though they provide ZERO value.
Thanks for posting - I wanted to make the same comment on the NY Times article but they don’t allow that. I couldn’t believe they printed that article and ignored the publisher side of the equation. Does the NY Times not understand the ad network ecosystem - advertiser, broker, publisher. Google/Yahoo presents an obviously alarming scenario for the publisher side of the ecosystem given the already existing lack of transparency by Google on publisher payouts that smells like monopolist behavior.
You do realize this is for search advertising right?
What does this have to do with publishers?
Ever heard of Google AdSense? The default behavior of AdWords is to include any ad you create, and any bid you set, on both the search and content networks.
First, key word being DEFAULT
Second, “radnips” here is discussing PUBLISHERS specifically, so your point is moot.
And third, aren’t you the guy that wrote the post on “How to game youtube and get the most views”? Enough said.
google is just 100 times more credible than any of you complainers (eg. the SEOtards)
Within the industry, a “publisher” is another word for a content site that runs any kind of ads (search, display, video, etc)
Check out this post for a summary of what I’m getting at: http://www.siliconvalleywatche.....ancial.php
One more point. For 99.99% of the publishers it works with, Google doesn’t even DISCLOSE what percentage they are getting. That’s right, almost anybody running AdSense ads does NOT know if they’re getting 10% of 80% or if that figure changes from time to time and depending on what. This is absolutely brilliant and provides a little glimpse into the kinds of things Google will do when it’s finally an unchecked monopoly. It will become 100% non-transparent. Publishers will be left with promises to send them compensation they deserve and no concrete numbers. We NEED COMPETITION!!!
Mike - what is the alternative? If you prevent the deal, you weaken Yahoo further. They are the only ones in the same solar system as Google in terms of market share, even if they are Pluto to Google’s Jupiter. If the volume of search queries is the currency that drives the market, the only way for Yahoo to compete is through growth of queries. It has nothing to do with the ad marketplace itself…in other words, the ad marketplace is just a by-product of Google’s true monopoly, which is a brand monopoly as THE search destination in consumer’s minds. Yahoo can only compete in the ad marketplace if they grow with consumers first. At worst, all this deal does is accelerate the rate at which ad dollars are inevitably flowing to Google. But for Yahoo, that’s one step they must take back in order for them to even have a chance at taking two steps forward. The same, then, must be said for consumers themselves. Unless you have an alternative that could help Yahoo grow? How about a government bailout!?
“Google may give Yahoo most of the revenue today from Google ads, but in ten years when Google is the only player in town, look for the terms to move towards a more standard Monopolistic model.”
Mike you have nothing to fear. Google will no longer dominate the market based on the simple subject what some call science of Economics.
I see you use a few economic terms in your article. if you look deeper you even provided a hidden solution, which I may ad I spotted 11 years ago when I got my first e-mail account that being a Yahoo account.
You see I was and in some areas still a Luddite. That allows me to see Tech for what it really is, especially in respect to the market forces of Demand and Supply.
You already have found the answer to the long term concern, though it may not appear in the short run. It is in your post.
I can’t believe that this seemingly well educated writer Randall Stross thinks that monopoly prices are driven up and quality of service is driven down by the mechanism of price setting. Even if Google set the prices artificially low the price would be driven up by resellers if there is a single supplier. The auction only ensures that Google gets a larger percentage of the natural price. NYT only supports this monopoly formation because they see it as a blow to the monopoly they really really hate which is Microsoft. But I think they are shaking hands with the devil.
Resellers? That’s what they are trying to stop: ad arbitrage. If only you knew what you were talking about instead of spewing conspiracy theories.
Arrington has an excuse: page views. What’s yours?
good stuff, i totaly agree with you.
All the writer did was regurgitate Google’s “auction = no monopoly” claim.
–rj
My View aka The Facts:
1. If Jerry got US$44 per share for Yahoo, he knows he is getting away with murder.
2. Jerry knows that a Microsoft deal is not going to stop Google, as he is still thinking linear. Otherwise he would have made his move at Google ages ago.
Unless he has some secret plan no one is aware of and it is some high stakes poker game.
3. Steve does not have to buy Yahoo, except for critical mass. Even then 30% or more of Yahoo users may jump ship. A buy would only serve in the short run.
4. Steve could pick up Yahoo for half as I e-mailed his office several months ago. Still would only serve in the short run.
5. Google is really fragile but you all just do not know it. Expect their value to slip by 25% ore greater within 12-24 months. Eat their short term lunch. Thus buy low sell high, then buy low and sell high until they bottom out to a steady price of what I expect to be anywhere from a low of $195 to a high of $375. A far cry from the almost $800 days you reckon yes?
6. facebook is worth only $1.85 billion and is really a web1.0 site. I had initially thought there were web2.0. If they are they are really boring to think of it. If a new portal does not enter the market then they will be worth higher. If a new portal of significant value enters the market, Facebook becomes a Bebo.
7. The market will adjust and determine the values above both in the short term and most importantly the long term. The alert entrepreneur will make sure of that.
The web is a very good example of how I think free market Austrian Economics work. Believe it or not, I happen to think so.
there are no facts in that comment
randall stross is a flat-out hack from a 5th tier university with a blatant google (and general SV) bias and zero knowledge of antitrust law or policy. i can’t understand why the New York Times is actually willing to sully its good name by publishing such ill-informed and biased trash.
“Being a monopoly just gives you the ability to charge much higher prices than you otherwise would be able to because you don’t have a competitor who can undercut you for less profit.”
When competitors undercut the prices of each other, it doesn’t need to be for less profit. The goal is to make as much profit as possible, and increased profit can come from a reduced price in tandem with reduced operating costs. In other words, you don’t necessarily set a lower price to only beat the competition, you do it because you can (because you’re more efficient, for example).
Geez, not only have these colleges boy’s f-cked up the main economy, they are charging in to destroy the internet as well.
Just what are they teaching at Stanford/Yale/ Harvard these days? How to destroy everything you touch? They are f-cking up the bay area?
Ballmer screwed things up. No other way of putting it. How he managed to lose Yahoo over few billion dollars is gonna be his biggest blunder. MS missed its biggest chance to become a player in this space.
money, money, money,
must be funny…
It´s OK ?
listen to gaggles secret sauce song. “adding location to search was the key”. who knew!
http://www.youtube.com/watch?v......ning.com/
Google.VideosLocator.com
Are you fucking kidding me? The dude singing (thanks for the video, btw) is talking about geo-location down to a few blocks, your site can’t even tell me what state I’m in.
i love you like a sista’. i dont care how many times you change your name or sexual orientation. if there was a filter your no substance irrelavant rant azz would not be here.
LoserLocator.com
what state am i in?
if you need to ask a computer what state your in you better “find yourself” first.
LocationExpert.com
Locator dude you are such a pathetic douche bag!
Mike don’t you have some kind of a douche bag filter you can use to get rid of this troll?
Journalists generally don’t understand economic principles. They should stick to reporting what “happened” or what is “scheduled to happen” rather than inserting their analysis to their reporting.
Good point.
We should leave Google alone for now. It’s safe to say the Internet still functions w/o Google, even if they do dominate search, you can still negotiate w/ advertisers yourself, or sell your own stuff. I see Chrome as more of a threat.
I was reading the NYT article … 15 seconds in and I jumped to the bottom of the page trying to find the comment section. I couldn’t find it.
I’m glad TC set the record straight because that guy hasn’t given it much thought.
Either that or he’s lining his pockets with lobbyist payola.
I’m not sure that’s the game Google’s playing but considering the amount of money at stake it wouldn’t surprise me at all.
Kudos to Michael for his initiative, but Google’s already gaining more market share than all the other players in the search market.
Fast forward into the future. Yahoo or not, Google has the monopoly if this trend continues. I see no reason why it wouldn’t continue.
There’s a need for a market that’s bigger than the search market.
TechCrunch should hire an auction theorist to get their analysis straight. Thanks for the first-year undergraduate economics lecture, but you should think more carefully about how auction markets actually work.
Another case of fanciful reporting by TC. Arrington’s main contention is that this deal would further /enable/ Google to behave like a monopolist. But it is not monopolies that we should fear; it is monopolistic behavior. Until Google exhibits the latter, it would be unjust to punish their success.
Minimum bid prices
Randall of NYTIMES completely ignored the fact that Google controls the minimum settings for the bids for certain keywords; this is even if NO ONE is bidding on those keywords, and this minimum has been increasing steadily over the years. Anyone who uses adwords for a while knows this very well. Poor research work.
Yes, but what your poor logic overlooks is the fact that they don’t make money if “NO ONE” bids on a keyword AND if “NO ONE” searches on it. They have an incentive to price the keyword acceptably (”what the market will bare”), or lose the sale.
A company also has linked-in, yahoo, and facebook in which to advertise.
Study what monopoly means; setting a bar for bids is exactly what monopoly is all about;
You are acting like Google will be supplying ads for all keywords. Google will only be supplying ads for keyword terms that Y! cannot monetize very well. We’re not talking about keywords like “homes for rent”, “online auctions”, “tech blogs” for instance. We’re talking about keywords that Y! currently does not show ANY sponsored search ads for currently.
Prices are set by the advertisers based on the market. If you not wish to pay $3.00 per click, then dont. You just wont be on the first page or the first result. So be it. Thats advertising. Increase your organic results then. Thats why SEO companies make a killing. Because people are too lazy to do some simple research and implement it themselves.
People will spend a bundle on advertising, yet skimp where it counts. The website development itself. I see it time and time again. Small businesses will pay thousands a month on advertising, yet scoff at even thinking about spending a couple thousand to have their website developed properly. That includes proper SEO. Or at the very least, take some classes. This is your business. Treat it like one.
They should have to disclose that the author recently wrote/is releasing a book on Google called Planet Google.
From the book description on Amazon: “Based on unprecedented access he received to the highly secretive “Googleplex,” acclaimed New York Times columnist Randall Stross takes readers deep inside Google, the most important, most innovative, and most ambitious company of the Internet Age”
A very important factor that will not be evident from clear economical analysis:
when Google provides ads across Google/Yahoo/Ask, adveritsers will have even less incentive to advertise on Yahoo and Ask directly.
This will further weaken the companies and they will be forced to increasingly rely on Google until they either completely elimiante their seperate advertising programs or crumble. Why advertise on 20% coverage market Y when you can just advertise on 95% coverage market G-Y-A?
I think some accurate economics would help here…
Monopolies (unless regulated into being) are the natural outcome of competition - specifically related to economies of scale and economies of scope. In the former, it is cheaper for one provider to serve a market than many. In the latter, it is cheaper for one provider to serve a market for two complimentary goods/services than having one provider each serving the good/service. In this case, we are talking about economies of scope - the two compliments being “search” and “ads”.
As Mike points out, research has shown that a natural monopoly is not sustainable without regulation. The monopoly becomes vulnerable if the economics change, or the complimentary nature of the service spectrum changes. The latter is more dramatic because it totally changes the game via innovation - someone comes along and shows that more value is created from ads by complimenting/delivering them with something other than search.
Today, google+yahoo combo may make a monopoly-like position, but it’s not sustainable. Why? Not because of price-based competition or competition that could come from a better ad-search model from Microsoft, but because of more valuable alternative compliments (e.g., like ads delivered effectively on the back of a social network). In simple terms, an ads+search monopoly isn’t sustainable because it could be beaten by an ads+social network competitor.
So should we fear a google+yahoo ad deal? Only in the short run. Only if you believe that search+ads is the end point rather than the starting point.
Good very timely response Mike.
Google has all types of small wrenches to apply to ratchet up it’s gain by becoming the only adwords game in town. Tens of thousands of companies are hooked on the customers adwords can generate for them and they can tweak the terms as much as they want. With Yahoo on board they won’t have to worry about what the cheapest price the market will offer, they just have to worry about the most they can charge without customers giving up on their text ad spending altogether.
This partnership will really hurt the many businesses that rely on this once-fluid marketplace that will become simply ‘how much will you spend to not lose access to your marketing base.’
Yet another article from Arrington against Google/Yahoo. How shocking.
You can always count on Microsoft propagandists to respond quickly.
I have a question that I hope you can answer for me Michael. First, I believe that it is just good copy that gets the user to click, right? Second, Why not just allow a search engine ( pick one ) to put code on your site to show them what people do when they get there. So if someone types for example “Flowers” into any search box they can rate that site according to its conversions.
Any feedback would be appreciated, As I am a tad confused as to why search engines stop at the front door.
I didn’t care if Google had made the deal with Yahoo because I honestly consider them a “nice” company and wont take advantage of there customers. BUT… once you get banned from on of there services you realize that you are done for. To market on the net, the only good way is adwords. Become banned from that and you screwed.
ps. GO MICROSOFT!
I wonder where a nixed Google deal send YHOO…how much of the deal is baked into the price…I think “Google deal anticipation” accounts for $5-6 of YHOO’s price today?
John, they don’t necessarily stop at the front door. Google, for example, tracks what plenty of people do if they are running the Google Toolbar, using Google’s web history feature, hit sites that run Google Analytics, using Google Checkout or AdWords advertisers that also choose to track conversions through the AdWords interface. Indeed, Google — if it wants — could tell what are the “best” sites through any, all or a combination of these signals.
Google has generally said that it won’t mix this type of information to help with ranking on an aggregate level (if you use personalized search, where you get results custom tailored for you, they very much will give a boost to sites you frequent, as can make a lot of sense).
But Google could change its mind on this. In the case of Google Checkout, when that launched some time ago, Google was very specific that it would NOT rule out using conversation data however it likes. Many thing that site visitation data as gathered through the toolbar is used, though I think Google would still say either that’s not the case or that they won’t comment on it.
Understand, however, that while at first glance using such metrics might seem a perfect solution, any signals can be gamed. Want to rank better on Google, if conversions are used. Get a few folks to do purchases, and that might be a good investment.
Google also has to be careful that if it does use such factors, given the widespread implementation of its free products (Analytics, AdSense, conversion tracking), it might run into issues that it has an unfair advantage over its competitors. Sure, Yahoo and Microsoft could offer some or all of these for free too (and in some cases, they do). But Google’s headstart and massive adoption might open yet more monopoly/anti-trust issues.
Danny, Thanks for your response . Would it make sense for a Yahoo, MSN or AOL to try and adopt something like this, and the hard part, try to write an algorithm against it ?
I can take the category I am in (not flowers) and know that 8 full time people in India work to game- in a sense- google, yahoo etc and get paid according to their results. The rest of the first page is filled with established brands, and I have spoken with a few of them, that also employ 10 people to outsmart those in India.
It’s a game I know I can’t win.
I may be dreaming, but, I can’t wait until I actually have a shot with a search engine, one that is based on the product and its appeal not one that is based on how well a company can work the system.
Thanks again for you insight