saga of the Yahoo-Google (Make Microsoft Go Away) Advertising Deal

The continuing saga of the Yahoo-Google (Make Microsoft Go Away) Advertising Deal

Is anyone else besides me bored with this? Yahoo, in their search for survival ...uh, relevance and respect, just seems to be hanging on by their toenails—willing to compromise their sovereignty in exchange for perpetuating the Yahoo name a while longer.

Regardless, we feel obligated to document their demise, uh ...cover Yahoo out of habit. After all, we've been reporting their misadventures since the beginning of time. Therefore, in spite of the fact that hardly anyone even asks a question about them in today's Google-centric searchscape, here's the rest of our obligatory monthly 'what's up' with Yahoo lately.

Google is planning to move forward with its deal to provide search ads to Yahoo, despite the possibility that the US Department of Justice (DOJ) antitrust division may file a lawsuit to prevent it. The deal, expected to take place around mid-October 2008, would provide Yahoo a revenue stream that it badly needs, because apparently they're not real good at figuring out how to make money on their own.

Unfortunately for Yahoo, this deal also greatly increases Google's already-dominant position in the search advertising business. And, that is the main reason why the DOJ has serious anti-competitive concerns about a potentially monopolistic Goohoo—especially now that Google controls more than 70% of the US search ad market.

Regardless, the deal provides Yahoo with an expectation that revenues will increase by about $800 million in the first year, perhaps giving them the cash flow they need to continue fending off the much publicized hostile takeover attempts by Microsoft and shareholder Carl Icahn. It may also provide dry powder for consummating a relationship with (Internet loser) AOL. That's in light of the recent approval by Yahoo board members to enter negotiations with Time Warner over acquiring bits and pieces of the tired old online has been.

Anyway, the Goohoo deal stipulates that Yahoo will select the search terms that Google can show ads for. Yahoo plans to show Google ads for less-common (aka, long tail) search terms for which Yahoo doesn't have ad inventory. Neither Yahoo nor Google can see the other's bid prices for the ads being shown. This safeguard is supposed to prevent Yahoo from cherry-picking Google's best ads.

So far, we're unaware of any way for advertisers to opt out of having their AdWords ads shown on Yahoo—except, perhaps, to avoid bidding on long-tail search queries (ouch!).

It remains to be seen how this move will impact overall PPC costs. Stay Tuned.

—Stephen Mahaney, CEO Planet Ocean | Head Researcher, Esoos Bob