Microsoft’s bid for Yahoo! is still on the table, and, as seen in The Wall Street Journal‘s DealJournal and Reuters’ DealZone, there’s speculation that both companies may be trying to hash out a deal. As I discussed in my first post about the bid, Microsoft’s bid was initially interpreted as a move to diminish Google’s dominance in search. The positioning of all these companies is especially important for online advertisers, for whom search engine optimization and display advertising have become important tools in their marketing strategy. I recently spoke to Amit Rahav, vice-president of marketing for Eyeblaster, which provides management tools to digital marketing agencies, to discuss the significance of the Microsoft/Yahoo/Google face-off to advertisers.
How have online advertising strategies developed recently?
The two marketing budgets are migrating into one. Companies have performance-driven budgets: they ask people to download, register, buy. Advertising is part of the branding budget. Search has been a breakthrough for performance, and display advertising has become a part of branding.
If the Microsoft/Yahoo! deal goes through, what will it mean for advertisers?
We’re seeing a consolidation of publishers, especially if Microsoft and Yahoo! merge. It marries two companies that are not as strong in search — they are powerhouses that mainly have strength in display, versus Google, whose strength is in search.
Microsoft has been trying to capture some of the business on search from Yahoo! but hasn’t captured significant market share. Google is strong on search but has trouble with display, especially premium advertising.
You say that there are distinct fields of dominance: Google in search and Microsoft and Yahoo! in display. Is this bad for advertisers?
For brand advertisers, the brand budget is migrating to online. Brand management used to be only 5 percent of overall spending. Now there’s suddenly room for additional online spending. But companies want advertising to work in multiple ways: they want to capture leads, get people to register. Ultimately they want a combination of both [search and display].
When we look at conversions, it’s not only impressions but the full experience. Now we can track the types of advertisements viewed, the search engines used. We want to give credit and invest in everything that led to the path. This is how to measure a successful campaign.
Why has it been hard for Microsoft, Yahoo!, and Google to succeed in both search and display?
It’s an issue of origin. Yahoo! has become a very strong portal brand, where you go for news, reviews, weather. Google pioneered in search — its search algorithms are very strong. These are very strong brands in consumers’ minds. Once you’ve found a good search engine, you will keep coming back. Google has $10 billion of a $32-35 billion worldwide market in search. They’ve done a phenomenal job.
Publishers are now seeking not just to leverage their property but also the property of other sites. Google has AdWords, Yahoo! is buying other sites. In ’07 the big trends were acquiring and developing the capability to sell others’ inventory. The problem is that you can’t really buy keywords.
Many observers interpreted Microsoft’s bid on Yahoo! as a challenge to Google. Is Google becoming too powerful?
Google’s strategy is that they will sell directly into consumers. For ad agencies, Google might be a short term friend but a long term enemy. Media planning is changing. Google is saying that everything should be on an automated platform. Companies are saying no. There are different channels, and there’s the importance of being unbiased. So from an agency perspective, it could be that Google is too powerful.
One concern is when there’s less competition — a mega publisher bypassing the agencies. The pressure may increase, but that’s an agency issue. Microsoft owns an online agency, so the question may be, “Are you recommending the best solution, or are you biased toward your own investments?” There’s so much fragmentation. It’s hard to know what works best for your company.
It will likely take a while for the Microsoft/Yahoo! deal to be resolved. What should online advertisers look out for in the meantime?
First-channel synergy will be important in a year marked by recession. Every account will need to be very accountable, knowing which mediums are most important to look at for ROI. Advertisers are learning online metrics. As the industry learns, we’ll be able to simplify the data.