The deal between Microsoft and Yahoo is very good for the paid search community. It creates a viable #2 competitor with enough market share to matter and a single API for developers to exploit. And Yahoo gets a few dollars for their retirement fund.
Some quick initial thoughts on the impact to each player in the game:
Advertisers get a single channel with 20-35% of the search traffic (depending on what and how you measure, and who you believe) which is *nearly* enough critical mass to actually spend time on. The core economic problem that Microsoft, and to a lessor degree Yahoo had before was that they didn’t offer enough inventory to justify the effort of managing let alone aggresively managing large keyword accounts on their platforms. Many advertisers have 20% of their keywords or less running on these engines, and spend 10% or less of their management time on them. Bing and Yahoo still need to attract users or advertisers won’t care. But at their current market share, or better yet if they can pickup 5 or 10%, there’s enough there to be worth the effort to equalize campaign sizes and spend perhaps 30% of campaign management time on them.
Proof that being dumb and rich is a far better strategy than just being dumb. Nothing except their money has justified Microsoft’s existence in this market until recently. Bing seems a reasonable search engine, but the AdCenter platform is pure Microsoft, meaning anything-but-cutting-edge and won’t really offer even the baseline of what the market really needs until version 3.0. They seem to be trying, but in management tools, software and API features, and overall ‘state of the art-ness’ the teams over there need to re-triple efforts to deliver a platform and API set as rich as Google’s. If they don’t, users and developers who now have a large enough market share to bother, won’t have enough patience to work around the limitations it takes to do so.
Yahoo can now spend their time and energy on being second or fourth best at a wide variety of internet content and web-app plays, perhaps to eventually sell each of those to richer and dumber rivals. Or maybe the idea was to get out of search so Google would want to buy all their other assets. This is the Sarah Palin move of search – quit and declare victory.
Paid Search Platforms and Tools
For purely selfish reasons, we’re glad to see the Yahoo and Microsoft platforms consolidate. Every feature we add to ClickEquations that had to touch 3 different APIs took two or three times more time (at least) than if it only had to touch one. We can build more cool features to help advertisers faster now. As mentioned above, the AdCenter platform has plenty of Microsoft quirkiness to it, but we’ll hope and assume they listen to the market and evolve. But in the case of API vendors we can do more with less.
I believe that search result quality has a long way to go, that the loyalty Google has is to the brand and therefore ultimately could erode quickly. The Bing/Yahoo platform will likely very slowly pick up steam, but MS has to go do some HUGE bus dev deals to buy more distribution (AOL?) and continue to innovate on the results. Over time, they could substantially erode Google share, but the road will be hard and long. In this case, a perfect fit for Microsoft BUT they need to earn it they’re not just going to be able to out-last the competition or wait for them to commit suicide this time.
Enabling very weak competition to become marginally viable doesn’t hurt Google in the short run. The fear of actual competition and even market share loss could very well spur the very smart folks at Google on to deliver even better stuff faster, as competition always does. So in the short and medium terms I’d say this is good for Google (and helps get the Gov’t monkey off their back for a while). In the long run, I’d still bet on Google but Microsoft does have a lot of money and know how to compete.
But mostly, I’m just really happy we have one less API to support.
There are many amazing things about Google. The one I’ve always been the most intrigued by is their ability to manage so many projects so well at such a large scale.
We can hardly imagine the number of things going on there – big diverse programs, developments, acquisitions, global scaling issues, etc. Yet relatively speaking things seem to get done and run amazingly smoothly.
This extends to their ability to throw a party.
I spent last evening walking the famous “Google Dance” event with friend and advisor Avinash Kaushik.
If Martha Stewart threw a tech party, this would be it. There was no detail, no extravagance, no space or idea left incomplete. There were gifts, and caricature artists, and music, and food (of all kinds & everywhere) and light shows, and photo-booths, and volleyball, and on and on. With an industry full of people streaming in by the bus load.
And yet like the Google homepage it was simple, friendly, and casual.
I can’t imagine the effort that went into making this event so complex and so seemingly effortless.
It was a great event, but it inspired even more awe about what these guys are doing and will continue to do during work hours.
I’ve suggested before that you should think of each search as a question.
Paid search ads are run in an attempt to raise your hand and deliver answers.
Today Google noted that they are monitoring over 1 trillion URLs, for use in finding the organic rankings which are delivered on search result pages. Wow.
But I was glad to see how they characterized the reason why they’re doing all this work:
As you can see, our distributed infrastructure allows applications to efficiently traverse a link graph with many trillions of connections, or quickly sort petabytes of data, just to prepare to answer the most important question: your next Google search.
Chris makes two very interesting additional points (Beyond the great name “laziness tax”.)
Advertisers typically set higher daily or monthly AdWords budgets than they want or expect to spend, simply because setting a budget equal to what they actually *expect* to spend would result in Google throttling back on delivery of their ad as the advertiser approaches the budget limit. So what you have is a scenario where a strong double-digit percentage of Google’s customers currently have higher budgets set than what they expect to spend, and an automatic matching beta that wrong assumes the advertisers actually *want* to spend all that budget.
Keep in mind that even should you opt out of “automatic match”, you will likely still feel its effects. If the history of AdWords new feature rollouts is any indication, 30-40% of advertisers go with whatever new features Google suggests. Were 30-40% of Google’s advertisers to use “automatic match”, I’d expect the increase in coverage and competition in Google’s ad space to result in keyword inflation as bad as the rising gasoline and food costs we are now experiencing.
Two great points. The Automatic Matching Option helps Google and nobody else.
Turn it off. And complain to your Google Rep.
Another lawsuit aimed and preventing the use of trademarked keywords was dropped this week. This time it was American Airlines who had filed a lawsuit against Google for allowing other to use their name to trigger the display of competitive ads.
According to Bloomberg:
American claimed Google violated its trademark by allowing competing airlines to bid on keyword searches that generate “sponsored link” ads on search-results Web pages. The ads take advantage of the American brand’s popularity, even if the name isn’t used in the ad, the carrier said.
Google settled similar suits by other U.S. companies before the untested area of trademark law could be addressed by a judge or jury. Foreign lawsuits still pose challenges to the advertising practice, part of Google’s AdWords program.
Courts in France have held Google liable for allowing advertisers to select trademarked terms as keywords, according to U.S. regulatory filings. Google, based in Mountain View, California, said it is handling or recently resolved similar cases in Germany, Israel, Italy, Austria and Australia.
Google had argued that its “invisible” use of trademarks isn’t technically “trademark use” under U.S. law. Google compared the program to practices such as placing generic drugs next to name brands in pharmacies and buying billboard ads next to those of competitors.
This last point is the reason I’ve never understood the merits of these suits. Trademark law is designed, in my very simple understanding, to prevent one company from confusing customers with a name that is similar (or identical) to another company.
Does buying a trademarked term as a keyword provide one company benefit from the name and reputation of another? Certainly. But isn’t that why all the car dealers rent space on the same block? Doesn’t it happen when magazines review all the products in one category together?
Every company in the world wants to steal customers and prospects from their competitors. Their efforts to do so yield better features, better pricing, and loads of other consumer benefits.
Using trademark protection to limit confusion benefits consumers. Using it to try and limit consumers knowledge and awareness of competition harms consumers, and should itself be illegal. Great to see a lawsuit go the right way.
After first passively and then actively squandering a business and technical lead, running Yahoo into the ground over the past few years, destroying and rebuking billions in shareholder value, and sending his entire executive team heading for the exits, it is worth a moment to consider what Yahoo CEO Jerry Yang has done to you, the paid search advertiser. And what you should do in return.
George Michie covers this topic over at SearchEngineLand today, and discusses the fact that with Google campaigns running on the Yahoo properties, there is a clear economic problem – your bids were set based on the value of Google search and search network traffic. And for the vast majority of companies that value is not equivalent to the value of Yahoo search and search network traffic.
In other words, you’re now paying for steak but getting served hamburger.
Your two choices, as George points out, are to accept this fact or cut bids which drives down your Google results. Nice choices, huh?
I’d like to suggest a third option. Google needs to de-couple the Search Network from the Google Search bidding, like they did a few years ago with the Content Network. In other words, we should be allowed to separate campaigns/ad-groups and bid to the value of the network and not be forced to buy it bundled with Google search.
Making this change puts advertisers in line with Google on this and any major network ad-distribution agreements. Ultimately, allowing us to opt in and out of individual distribution channels, and get click-level reports on performance is also necessary.
It took them a while but Google did the right thing on the Content Network, and has made incremental improvements in these areas since the first step. All these moves were driven by advertiser feedback and demands. Time to start speaking up on this one.
Jerry has cost enough people money and heart-ache. It shouldn’t have to cost all of us.