In a bit of irony, Microsoft-owned Avenue A/Razorfish’s search VP Matt Greitzer said that the recently announced Google-Yahoo paid search pact “is going to be good news for advertisers.” Greitzer subsequently qualified (or might have been asked to qualify) his early enthusiasm for the deal by suggesting that it could result in higher prices for advertisers.

While a number of search marketers have celebrated the Google-Yahoo deal, traditional ad agencies are expressing increasing concern and discomfort about Google’s growing power in the broader advertising marketplace. For example, ad giant WPP’s CEO Sir Martin Sorrell has reportedly changed the way he refers to Google from “frenemy” to “froe,” whatever that means. WPP recently announced a significant partnership with Yahoo, while WPP rival Publicis has a partnership with Google.

There’s a dual concern among large, traditional ad agencies that advertising is becoming too technology driven and that technology companies are seeking to muscle into the ad agencies’ turf and have direct advertiser relationships rather than work through them. That concern, however, isn’t limited to Google but extends to Microsoft and others as well. Ultimately, these companies need agencies and it would be short-sighted to try and compete directly with them.

A different set of concerns are being expressed by privacy advocates, law professors, and other critics who want to see Google’s dominance of search curtailed or limited. Google has been so successful that its success has now become something of a political liability for the company. This poses a very interesting and challenging question: What should Google do to mollify critics and those who increasingly believe it constitutes a search monopoly?

Microsoft CEO Steve Ballmer says that Google has “won” (for now) but sees long term success against the company:

“I think we have three things we’ve got to do. There are some things that we just have to, as we say, ante up to be in the game: relevance, cap-ex, responsiveness. There are areas in which we’re going to differentiate and make Google play catch-up. And then there are areas in which we’re trying to change the rules. I think Google is going to have to decide whether they want to come with us. If this Live Cashback thing is successful, they’re going to have to decide if they want to play the game or not.”

Ballmer also says (as he’s done before) that Google has “one product” (search):

“The reality is one product makes 98 percent of all of their money, search. Oh, they have two products, AdWords and AdSense. They have two products, both search-based, that make all of their money, and it hasn’t changed a lot in five years. I’m not giving them a hard time, but we’ve got to learn – if you say, what have you learned, we try to learn from people’s successes, not from people’s gestalt. The gestalt is yet to be proven.”

While that characterization is an oversimplification, Google is mindful of the need to diversify revenues, which is why it bought YouTube and DoubleClick. And while YouTube has yet to pay the dividends that many had anticipated, Citigroup’s Mark Mahaney estimates that Google will make in excess of $1 billion in 2009 in online display ad revenues on properties such as YouTube, Google Videos, Images, Maps, and Finance, and through DoubleClick. According to the financial analyst, approximately $500 million of Google’s projected display revenues will come from YouTube.

Meanwhile, at Yahoo, there’s speculation about CEO Jerry Yang and his future in that role amid the impending reorganization. TechCrunch repeats the news that Yang has apparently been absent from day-to-day hands-on management in Sunnyvale during the past week. It also published an updated version of its Yahoo executive tracker rundown, with new additions and information about who’s left and where they are now.

From the triple-hearsay file comes this Silicon Alley Insider report that Microsoft might be interested in re-engaging in acquisition talks if shareholders oust Yang at the annual meeting.

And notwithstanding all the news of employee departures at Yahoo, the company said it plans to double headcount in India this year.

Related Topics: Channel: Industry | Search Biz

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About The Author: is a Contributing Editor at Search Engine Land. He writes a personal blog Screenwerk, about SoLoMo issues and connecting the dots between online and offline. He also posts at Internet2Go, which is focused on the mobile Internet. Follow him @gsterling.

Connect with the author via: Email | Twitter | Google+ | LinkedIn



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