Yahoo and Google agree online ad deal

Simon Norris, founder of paid search expert Periscopix, comments on the announcement of the pact between Google and Yahoo!.

The essence of the deal is that Yahoo! is going to try carrying Google ads in its own results pages (and maybe elsewhere on its site - we'll have to wait for more details).

The trial is only limited at the moment, so it is not currently known how extensive it may become.

For Google, it is a great result: it continues to extend its reach, not just as a leading search engine, but as an adverting syndication 'hub'.

This allows advertisers to 'deposit' ads, creating a network of sites to which these are distributed and selecting which are the most appropriate for the site/page in question ('contextual targeting').

The Google 'hub' also supplies the ad whether in text, image or video format, and undertakes the back-end billing.

The deal also significantly diminishes the threat to Google from the only large, established corporations that could have pulled together some credible competition - although there is always the view that a 'cool' new start-up is always going to be a bigger threat anyway.

For Microsoft, it is a bad result.

No matter how hard it tries, it doesn't seem to be able to build up a significant audience share of the search market.

For Yahoo!, it is a bad result as it is a tacit admission that its own ad-serving system Panama has failed to match up to that offered by Google.

This system was launched in 2007 and turned out to be largely a copy (and a slightly inferior one at that) of Google's own long-established system.

Yahoo! now seems to have decided that the best route forward is to cut out all of the costs of running its own ad system (development, sales support, billing and so on) and take its ads directly from Google.

However, it seems safe to assume that Google will also be keeping a sizeable proportion of the revenue generated from these ads.

It may also limit Yahoo's ability to innovate in the future.

Overall it's a good result for advertisers, as it will be much more straightforward for them to set up and manage their campaigns through a single system that serves the two biggest search sites.

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