Despite Google Deal, Yahoo Remains a Powerful Player

Danny Sullivan on Search Marketing

By Published on .

Many commentators' reactions to the Yahoo-Google paid-search ad deal remind me of Charlton Heston's reaction when he saw the broken Statue of Liberty at the end of "Planet of the Apes": "You maniacs! You blew it up! Damn you! Damn you all to hell!"

Did Jerry Yang effectively blow up Yahoo in his quest to save it from Microsoft by giving it all up to Google? "Time will tell" is the safe answer. But let's look at things from a marketer perspective.

Yahoo has not given up on the search-ad business. Microsoft likes to talk as if competition has been lessened by the Yahoo-Google deal but conveniently overlooks the fact that there remain three major marketplaces: Google, Yahoo and Microsoft. If Microsoft had won, there would have been only two.

Danny Sullivan
Photo: Jason Meyer
Danny Sullivan has been covering the search-marketing industry for more than a decade and is editor in chief of SearchEngineLand.com.
Yahoo will carry Google ads in searches where it will earn more with Google and where it has no ads at all. We're still waiting for details on how it will work, but Yahoo's Panama system and direct search sales aren't going away. I suspect Yahoo will purposely keep it a mystery how and when Google ads will appear as further incentive for advertisers to continue doing business directly with Yahoo. The company still has twice the U.S. query volume of Microsoft, so it will remain No. 2 for advertisers.

Prices likely will go up, since Google is said to do a better job monetizing search (i.e., making advertisers pay more), and Yahoo will watch and learn. But raising the price of search ads was already Yahoo's goal with Panama -- and Microsoft isn't out to save advertisers money either.

Will there be any Yahoo left? Wasn't the company's future tied to a Microsoft merger? Bull. A multibillion-dollar search marketplace that Microsoft still hasn't cracked, and Yahoo's crazy for thinking it might have a better chance on its own? I think much of this "correct thinking" has been colored by investors with visions of a short-term cash-out rather than faith that the company still has incredible assets -- assets Microsoft thought were worth about $40 billion.

Yahoo's biggest problem is its failure to get that message across to employees and investors. But searchers? While they may have heard rumblings of the travails, if they were using Yahoo before, they probably still are. And as long as Yahoo has that audience, it remains a powerful player. But it will have to fix the lack of faith in its leadership and the drip-drip drop of overall search volume. Then maybe it won't look so broken, even to the investors.
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