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In most industries, a merger of two major companies would cause everyone else to panic over a decline in competition.
Saturday, February 2, 2008
In most industries, a merger of two major companies would cause everyone else to panic over a decline in competition.
But in the case of the online advertising market, advertising and media executives said on Friday that they liked the prospect of a combined Microsoft and Yahoo. Google, they said, has become so dominant in its grip over the online audience that the merger might be the only way to produce a competitor strong enough to face off with it.
“It’s so reductive to say ‘Google is evil’ or ‘Google owns everyone,’ ” said Sarah Chubb, president of CondéNet, the digital arm of Condé Nast. “But what it comes down to is, competition is good for everyone in the marketplace.”
And competition, Ms. Chubb and other executives said, would surely be increased if Google’s foes bulk up. Despite more than a year of courting advertisers and media companies, Microsoft continues to lag Google in online ad sales and in its share of the consumer search market. Yahoo, once a prime competitor to Google, has been slipping since the departure last summer of several ad sales executives who had deep relationships with ad agencies, the executives said.
Google, on the other hand, continues to expand its ad revenues at rates nearing 30 percent a year, and it owns the sites with the most total worldwide traffic. Google also received good news last month when the Federal Trade Commission cleared its merger with DoubleClick. That company delivers display advertisements for Web sites and has deep relationships with many media companies. (Google is still waiting for clearance from the European Commission.)
Many people in traditional media companies and ad agencies had started thinking that Google had simply won the battle. Just two weeks ago, the Publicis Groupe, one of the largest ad holding companies, announced that it had been working closely with Google to develop advertising technologies — becoming the first major player in traditional advertising to publicly embrace Google.
Other ad executives have been more cautious in their involvement with Google. Martin Sorrell, chief of the WPP Group, another advertising conglomerate, labeled Google the “frenemy” in 2006.
A WPP Group executive said Friday that Microsoft’s $44.6 billion bid for Yahoo was great news.
“It has to be good to have more than one strong company,” said Mark Read, director of strategy for the company, which owns ad agencies like JWT and Ogilvy & Mather. “It is good for investment. It is good for competition.”
A combined Microsoft and Yahoo would beat Google in Web traffic and come closer in ad revenues. Most importantly, the pair would give Google a greater challenge as it tried to enter display advertising, because Yahoo has the largest share of that market.
Google made most of its fortune through small text ads that are tied to Web searches or other content on a page. But media companies expect much of the growth in online advertising to come from display ads — flashy pictures and videos that are purchased by companies like Coca-Cola and Procter & Gamble.
There are companies that would not be happy with a deal for Yahoo. Time Warner, for example, is expected to try to spin off its AOL unit, and Microsoft and Yahoo were widely considered to be possible bidders.
“AOL missed its chance,” said Shar VanBoskirk, an analyst at Forrester Research. “I’ve been thinking: would Google have any reason to buy AOL? I just don’t think they need it.”
Consumers also may not like the idea that data about more of their Web meanderings would end up under the same roof.
Part of the allure of the Internet for advertisers is the potential to use consumer data to deliver different ads to different people, based on their interests. Google has long told investors that it aims to be a pipeline for all advertising in the future, on the Internet and elsewhere, and the company is experimenting with ways to use data about consumers to deliver targeted television and cellphone ads. A postdeal Microsoft would have a bigger trove of data about Web users and could take advantage of it across more sites.
In the short run, a stronger Microsoft might force Google to lower the cut of revenue it takes from media companies when it places ads on their sites. But in the long term, traditional media companies may find themselves more beholden to the technology that Google and the combined Microsoft-Yahoo develop. Ms. VanBoskirk went so far as to suggest that media companies should stop trying to sell ads on their own and, instead, license their content to the technology companies.
Advertising executives said they expected more shakeouts.
“Whoever the players are, they need to be strong,” said Rishad Tobaccowala, chief executive of Denuo, a unit of the Publicis Groupe that focuses on emerging and future technologies. “While Google might be one player and Yahoo-Microsoft another player, the other global players might be Nokia, China Mobile, Apple plus Disney.”
By LOUISE STORY
Published: February 2, 2008
But in the case of the online advertising market, advertising and media executives said on Friday that they liked the prospect of a combined Microsoft and Yahoo. Google, they said, has become so dominant in its grip over the online audience that the merger might be the only way to produce a competitor strong enough to face off with it.“It’s so reductive to say ‘Google is evil’ or ‘Google owns everyone,’ ” said Sarah Chubb, president of CondéNet, the digital arm of Condé Nast. “But what it comes down to is, competition is good for everyone in the marketplace.”
And competition, Ms. Chubb and other executives said, would surely be increased if Google’s foes bulk up. Despite more than a year of courting advertisers and media companies, Microsoft continues to lag Google in online ad sales and in its share of the consumer search market. Yahoo, once a prime competitor to Google, has been slipping since the departure last summer of several ad sales executives who had deep relationships with ad agencies, the executives said.
Google, on the other hand, continues to expand its ad revenues at rates nearing 30 percent a year, and it owns the sites with the most total worldwide traffic. Google also received good news last month when the Federal Trade Commission cleared its merger with DoubleClick. That company delivers display advertisements for Web sites and has deep relationships with many media companies. (Google is still waiting for clearance from the European Commission.)
Many people in traditional media companies and ad agencies had started thinking that Google had simply won the battle. Just two weeks ago, the Publicis Groupe, one of the largest ad holding companies, announced that it had been working closely with Google to develop advertising technologies — becoming the first major player in traditional advertising to publicly embrace Google.
Other ad executives have been more cautious in their involvement with Google. Martin Sorrell, chief of the WPP Group, another advertising conglomerate, labeled Google the “frenemy” in 2006.
A WPP Group executive said Friday that Microsoft’s $44.6 billion bid for Yahoo was great news.
“It has to be good to have more than one strong company,” said Mark Read, director of strategy for the company, which owns ad agencies like JWT and Ogilvy & Mather. “It is good for investment. It is good for competition.”
A combined Microsoft and Yahoo would beat Google in Web traffic and come closer in ad revenues. Most importantly, the pair would give Google a greater challenge as it tried to enter display advertising, because Yahoo has the largest share of that market.
Google made most of its fortune through small text ads that are tied to Web searches or other content on a page. But media companies expect much of the growth in online advertising to come from display ads — flashy pictures and videos that are purchased by companies like Coca-Cola and Procter & Gamble.There are companies that would not be happy with a deal for Yahoo. Time Warner, for example, is expected to try to spin off its AOL unit, and Microsoft and Yahoo were widely considered to be possible bidders.
“AOL missed its chance,” said Shar VanBoskirk, an analyst at Forrester Research. “I’ve been thinking: would Google have any reason to buy AOL? I just don’t think they need it.”
Consumers also may not like the idea that data about more of their Web meanderings would end up under the same roof.
Part of the allure of the Internet for advertisers is the potential to use consumer data to deliver different ads to different people, based on their interests. Google has long told investors that it aims to be a pipeline for all advertising in the future, on the Internet and elsewhere, and the company is experimenting with ways to use data about consumers to deliver targeted television and cellphone ads. A postdeal Microsoft would have a bigger trove of data about Web users and could take advantage of it across more sites.
In the short run, a stronger Microsoft might force Google to lower the cut of revenue it takes from media companies when it places ads on their sites. But in the long term, traditional media companies may find themselves more beholden to the technology that Google and the combined Microsoft-Yahoo develop. Ms. VanBoskirk went so far as to suggest that media companies should stop trying to sell ads on their own and, instead, license their content to the technology companies.
Advertising executives said they expected more shakeouts.
“Whoever the players are, they need to be strong,” said Rishad Tobaccowala, chief executive of Denuo, a unit of the Publicis Groupe that focuses on emerging and future technologies. “While Google might be one player and Yahoo-Microsoft another player, the other global players might be Nokia, China Mobile, Apple plus Disney.”
By LOUISE STORY
Published: February 2, 2008
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