That's the immediate conclusion from the pair's recent deals to acquire advertising exchanges. Google agreed to pay $3.1 billion for DoubleClick, which recently launched a Nasdaq-style exchange for buying and selling display ads. Yahoo matched the move with a $680 million deal to buy Right Media.
The deals seemingly leave rivals such as AOL and Microsoft Corp. on the sidelines, although published reports last week had Microsoft rumored to be considering a deal to acquire 24/7 Real Media as the online ad space continues to heat up.
The stakes are huge, no doubt. But for b-to-b advertisers, the real story behind these deals is the emergence of more integrated industrywide exchange models not only for online search but also for Web banner advertising—and perhaps also print, radio and more—as well as the need to balance the risks and opportunities of this approach.
The impact on b-to-b advertisers "won't be very visible at first," said Forrester Research analyst Charlene Li. "It will be the same way that search crept up on people; it took about four years of gaining steam and really six years before it really took off. [An online display ad exchange] will take a little while to catch on as well."
Meanwhile, Li and other experts recommend that b-to-b marketers watch for integration of Google's back-end text ad tools with new banner ad management capabilities over the coming year.
On the Yahoo side, Li said marketers should experiment with Right Media's already-operating ad exchange capabilities, in particular focusing on behavioral targeting capabilities. Both steps will help them get ready for a future in which integrated online buying and exchange-driven economics take a larger role in Internet ad sales, Li said.
Despite misgivings from some quarters, many analysts see little to worry advertisers and publishers which, they say, can benefit from more efficient ad markets.
"I do think it should result in increased inventory utilization for publishers and higher net realized value for advertisers. That's the net-net of an efficient auction process," said Chuck Richard, VP-lead analyst at Outsell Inc. "I have a hard time seeing a problem."
Exactly how Google and Yahoo institute their exchange models, however, leaves both buyers and sellers with some legitimate concerns—in particular the degree to which these markets will function like true exchanges. The concern is complicated by the fact that Yahoo and Google also sell ads directly.
"When it comes to using Google as a source of advertising for publishers to complement their own sales activity, it isn't clear in the end if this will be truly complementary or destructive," Richard said.
In theory, at least, ad exchanges would bring much-needed transparency and visibility to the online ad market, as advertisers and pub- lishers both could see what inventory is available and how it is being priced.
In announcing its deal with Right Media, Yahoo CFO Susan Decker said the acquisition would "allow for a more liquid marketplace with a larger pool of inventory," beginning initially with banner ads but quickly moving on to video and mobile advertising as well. In its current model, Right Media takes about a 7% cut on ad exchange transactions.
Talking in similar language in discussing the DoubleClick acquisition, Google CEO Eric Schmidt touted the integration of online search and display ads along with a common tool set to manage the selling and buying of each. "That integration is something people have been asking us for a very long time," he said.
Marc Diana, CEO of Leadpoint, which operates an online exchange for the marketing lead generation industry, said: "The value I see in exchanges over brute sales forces is that it creates a tremendous level of efficiency, especially when you are able to assemble a `disaggregated' critical mass of buying or selling power. The nirvana of that is when you are able to weave both ends together. That is a true exchange and is the most efficient mechanism to price and trade."
The power of self-service should not be underestimated either, Diana said. "At one point you needed a stockbroker with access to a physical ticker to buy and sell stocks," he said. "Those days are long gone with online stock trading."
The same evolution is well under way with ad sales, he added, with Web-based self-service tools that combine front-end bid management and back-end analytics replacing or at least augmenting traditional relationship-driven ad sales.
In the end, Google and Yahoo, the companies they are acquiring and the online ad industry as a whole are facing yet another tsunami of change.
"The display market is a big, frag- mented, intermediated, messy, friction-filled market; and an exchange at its core brings order to that market," said Mike Walrath, founder and CEO of Right Media, in a recent inter- view with BtoB. "You have to create that. You get a lot of skinned knees by trying to do this."
BtoB Senior Reporter Carol Krol contributed to this report.