No, it’s not a merger
Is this the beginning of the end for Yahoo’s Right Media Exchange? As confirmed by a Yahoo blog post, it has reached an agreement to allow Google Inc. to advertise on some of Yahoo’s most popular websites, adding a new turn to the long-running rivalry between the two Silicon Valley Internet firms.
There were rumours of Google and Yahoo talking about an ad alliance last year and it seems that maybe they worked something out, after all. Yahoo recently signed a non-exclusive agreement to let Google display ads on Yahoo properties using Google’s ad programs for both traditional computers and mobile devices. The Yahoo sites that will make use of Google’s so-called “contextual” ads include finance, sports and news websites (Yahoo News and Y! Finance). Using Google’s AdSense and AdMob services, Yahoo will begin drawing upon Google’s massive online advertising network to show marketing messages related to the content that’s being perused.
What this means is that the two companies will have a relationship similar to the one that Google has with publishers all over the Web: they will give Google access to some of their unsold inventory, and Google will insert small ads on behalf of its advertisers.
Yahoo’s company blog states, “Today, we’re excited to announce that we recently signed a global, non-exclusive agreement with Google to display ads on various Yahoo! properties and certain co-branded sites using Google’s AdSense for Content and Google’s AdMob services By adding Google to our list of world-class contextual ads partners, we’ll be able to expand our network, which means we can serve users with ads that are even more meaningful. For our users, there won’t be a noticeable difference in how or where ads appear. More options simply mean greater flexibility. We look forward to working with all of our contextual ads partners to ensure we’re delivering the right ad to the right user at the right time.”
While Google has become the internet’s most prosperous company, Yahoo has been struggling to attract more advertisers in recent years, even though more marketing budgets have been alloted to the Internet.
Yahoo and Google are old rivals in the online-search advertising market. Yahoo’s previous partnership with Microsoft Corp. (where Microsoft handled its business) saw the two effectively teaming up to counter Google’s dominance in that market.
Yahoo had earlier attempted to tie up with Google in 2008, which was rejected by the U.S. Justice Department. Both companies know that, for regulatory and anti-trust reasons, it would be difficult for them to do a huge deal. A more incremental approach to sales outsourcing – first contextual, then audience targeting – would be easier for the market and government to digest. It’s worth speculating whether the AdSense ads will lead to something bigger. On the other hand, a truly significant tie-up between Yahoo and Google would undergo a whole lot of regulatory scrutiny.
As of now, Google remains a heavyweight in Yahoo’s core business of display advertising. Meanwhile, Yahoo has been struggling to attract more advertisers in recent years, even though more marketing budgets have been shifting to the Internet. Normally Google retains part of the revenue generated from the ads shown on its partners’ sites and in this case the revenue split with Yahoo wasn’t disclosed. While this deal may aid Yahoo with Google’s stronger technology, it certainly points out to Google’s dominance in the online world
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