Google + Yahoo : Your Thoughts?

[kblessinggr]

Google and Yahoo fight with the feds - Legal Pad

Some key quotes:

Google and Yahoo had hoped to have it all up and running by now. As you may recall, the two Internet giants announced an alliance last June in which Google would supply Yahoo with search ads to supplement Yahoo’s own. Google would get a big new customer for its ad-delivery service, while Yahoo would get a new source of revenue - and best of all, they’d keep Microsoft from swallowing Yahoo.

What’s the hang-up? Well, there are three basic concerns about just what this alliance really amounts to. First, if it had been a merger between Google, with 70% share in the paid-search market, and Yahoo, with the next 20%, it would clearly violate antitrust laws by creating a monopoly. (Paid-search ads are the ones that show up near the top of a search-result screen or off to the side, under the rubric “sponsored links.”) Second, if Google were paying Yahoo to exit the paid-search arena, that would be an illegal agreement between competitors to allocate markets. Third, if Google and Yahoo were agreeing to set a price floor for the two companies’ paid-search offerings, that would be illegal price-fixing.


The actual deal being proposed looks something like a slow-motion version of the first two scenarios, and it might constitute an immediate realization of the third.

Then there’s the price-fixing issue. Nobody’s price fixing, Google and Yahoo insist, because ad prices will continue to be set by separate auctions. That’s true. But part of the idea with this alliance is to replace some Yahoo ads on Yahoo search screens with Google ads, when the Google ads will fetch more revenue. Here is an oversimplified hypothetical example: Suppose you’re an auto parts dealer trying to drum up some business with search ads. You bid for the query “spark plugs Dallas Texas” on both the Yahoo auction and the Google auction-and learn that the going rates on Yahoo and Google, respectively, are $0.80 per click and $1.20 per click. Google reaches more users - hence the higher bids - but you decide to go for the $0.80 ad on Yahoo.


Guess what? You’ll need to pay the $1.20 anyway. Why? Remember that with the Google alliance, Yahoo now has the choice of going with ads delivered through its own system or through Google’s. Yahoo, of course, is going to run the ad that makes the most money - the ad from Google. In fact, Yahoo would never run its own ads if they were priced more cheaply than an available, comparable Google ad. In that sense the Google ad prices, though set by auction, would effectively set a floor for the prices of comparable ads displayed on Yahoo. Price floors constitute illegal price fixing.

 

[BlueYonder]

I am the search engine, I am the search engine, I am the search engine! Goo-hoo g'joob!

Those are my thoughts.

 

[Rage9]

Total butt seckz.

 

[$5 Submissions]

Ad market monopoly. Probably will suck the same way other monopolies suck.

 

[xentech]

The only problem I have about it is the part where if the Google ads have higher bids then the Yahoo ads, Yahoo will display with Google ads instead. Apart from that I don't see any problems with it, means more exposure and revenue for me!

 

[xmcp123]

The real irony is that you will now get even less clicks from yahoo.com than before. I wonder what % will become search network traffic.