Yahoo Deal Could Blackout Google Display Ads

    February 6, 2008
    WebProNews Staff

Yahoo has been very good at working the display advertising business, and although weakness in the automotive and financial markets depressed that business, Microsoft’s deal could strengthen it again.
Yahoo Deal Could Blackout Google Display Ads

To understand why display advertising may scare the frilly underthings off Google, one has to understand the nature of Google’s ad placements. Google has made a multi-billion dollar killing off its little text search ads, and has a market cap of $157 billion because of them.

Google has since sought ways to diversify its ad inventory. Through placements on the Google AdSense partner sites with which it shares ad revenue, Google displays image and video ads, both at a higher premium than text.

That also presents the motivations for Google to bid for DoubleClick, and fortifies its belief that DoubleClick represents a complementary business: display ads versus the contextual kind.

A Bloomberg report cited the figures representing text ads against display ads, and it doesn’t paint a pretty picture:

With growth slowing in the market for text ads, Google set its sights on display and multimedia ads, where total U.S. sales will jump 60 percent by 2011 to $13.7 billion, according to researcher eMarketer Inc. Google has relied on search-linked ads for almost all of its $16.5 billion in annual sales and the sixfold increase in its stock since August 2004.

“Even though Google may be looking forward and seeing this world where they own online advertising, at this point they’re really only owning one flavor,” said Jon Gibs, vice president at the research firm Nielsen Online in New York. “They really are going to be facing quite a giant in the other part of the display ad universe.”

Now we can talk about conversions. Yahoo has enjoyed display advertising success, which they would not do if those ads did not perform to the advertiser’s satisfaction. Couple that with some webmasters in Yahoo’s Publisher Network claiming better conversions than they saw with Google’s AdSense, and The Fear for Google becomes evident.

Delays in approving the DoubleClick deal in Europe cost Google time. Eventually, Yahoo has to do something about the Microsoft bid or face lawsuits from its big institutional investors.

Once Microsoft and Yahoo can sell display ads across Yahoo and MSN properties, the combined firm should rake in the profits. If you think about it for a moment, maybe a successful Yahoo/Microsoft deal helps Google a little bit in arguing the DoubleClick deal won’t be an anti-competitive purchase.