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.

Opinions expressed in the article are those of the guest author and not necessarily Search Engine Land.