Should Advertisers Fear GoogleHoo?

Forget the business issues over the deal where
Yahoo will
selectively serve Google ads on the Yahoo site. What about the impact on
the advertisers? Overbidding on Yahoo and potentially underbidding on
Google’s network system will likely be the most immediate changes. But there
are positives, as well.

Yahoo will choose to serve Google ads when Google bids are higher and
Yahoo ads when Yahoo bids are higher. Impact: Two-fold:

• Overbidding On Yahoo: If your bidding system is rational, you bid more
  for a keyword on one engine than the other because the traffic converts
  better on that engine. If Acme’s Google bid is higher than its Yahoo bid
  for "Foo Bar," they are guaranteed to pay more for lower quality traffic.
  
   
• Underbidding On Google’s  Network: Over time, smart bidding algorithms will see that the
  performance of the "Foo Bar" keywords on Google syndication
  network (Google ads place on sites Google doesn’t own) have declined
  and bids will drop on those keywords for Google. This means you end up
  underbidding slightly on Google and leave opportunity on the table.

Yahoo could serve more granular search ads. Theoretically, instead of
relying on its ever-annoying canonicalization algorithms, it could serve
more tightly targeted Google ads that recognize the difference between
"brother" and "brethren" instead of obviating those distinctions. That would
be a big win, but it’s quite likely that they can’t pull that off as it’s
too deeply ingrained in their platform.

Yahoo will pick up Google’s ability to serve content ads. Yahoo’s
contextual advertising is broken and thoroughly under-utilized. Using
Google’s contextual ads will have much greater range, and that may
benefit advertisers
who know how to make content "work" for them.

For most advertisers and their agencies, overbidding and dilution will be
the dominant impacts in the short run. The lost granularity and inability to
cleanly segment Yahoo bids from Google syndication will lead to
inefficiencies. Google could address that by creating more flexibility to
treat syndication partners independently. Hopefully, if we get to that
point, Google will recognize the benefits all around and make that happen.

Does the long-range prospect of Google controlling 90 to 95 percent of
the search and contextual advertising game scare us? A bit.

A little healthy paranoia is a good thing. However, the auction for
impressions pricing model makes one-stop shopping less threatening. Google
doesn’t set the prices any more than the New York Stock Exchange does. It
simply presents a single marketplace in which advertisers can compete with
each other for prominence. As such, the benefits of simplification could
outweigh the potential risks of monopoly.

George Michie is Principal, Search Marketing for the Rimm-Kaufman
Group, a direct marketing services and consulting firm founded in 2003. He
regularly writes for the
Paid Search
column here on Search Engine Land.