Microsoft’s Trojan Horse (Also Google’s): Display Advertising
So while all the attention on who Microsoft is hunting next–after its latest parry at grabbing Yahoo’s search business was foiled once again–has settled on Time Warner’s AOL (see BoomTown’s post on that interest from Monday), it would be a mistake to assume that the software giant is not still aiming directly at Yahoo.
Why?
Because it must, and not only for the reason–to get control of its Yahoo’s #2 search business–that has been much focused on.
It’s also Yahoo’s (YHOO) strong display advertising business that Microsoft (MSFT) is clearly after.
It has been obvious that Microsoft needs to get hold of Yahoo’s search market share to even begin to compete with its archrival Google (GOOG) in the Web’s goose-that-laid-the-golden-egg search business.
But the future hope, according to numerous sources within the company, is to gain a foothold at Yahoo in order to someday take over its much more impressive and potentially more lucrative online display business, which includes ads like banners.
“This is not just about search,” said one source. “It is about scale in all aspects of a market that is going to be gigantic.”
In a way, it’s a reliable old Trojan Horse strategy, getting into Yahoo’s house in search and then moving onto display, an arena which many think will be the real moneymaker in the years ahead.
Right now, search rules in the online ad business, which totaled $21.2 billion in 2007, according to the Interactive Advertising Bureau.
Search advertising, which Google completely dominates, with Yahoo second and Microsoft third, accounts for 41 percent of that total.
Display accounts for 34 percent. In this space, Yahoo is king, while Google has been a minor player, despite its recent purchase of DoubleClick. Microsoft has been trying to muscle its way in too.
Many think the scaling and targeting technologies that are developing and that Google or Microsoft certainly can bring to the table–combined with the relationship business for which Yahoo is famous–is the next killer app to make display dominate.
Google, though it is trying to downplay its overall power of late, is aiming hard at doing in display what it has done in search, especially trying to use its powerful technology skills.
“We really feel we’re in a position to become the world’s largest display ads provider,” said Google’s SVP Jonathan Rosenberg in its first-quarter earnings call in April.
Obviously, Microsoft’s efforts in this arena would be greatly helped by being tightly integrated into Yahoo’s search business first.
So, while AOL’s (TWX) Platform A ad business is also attractive, it still only sits in the middle of the online ad food chain.
That’s why Microsoft is not likely to take its eyes off the real prize: Yahoo’s much tastier high-end display business.
Please see this disclosure related to me and Google.
Comments
Kara:
Your site has had ‘hands-down’ the best coverage on this MSFT-YHOO roadkill. Yet, I have noticed lesser sites with far inferior coverage or one’s that mostly regurgitate others story have had a very active ‘comment’ community. Is it because of the higher traffic to those sites or possibly the dumbing down / sensationalization of the issue so it resonates well?
Posted by Sudheer Ravindra at July 16th, 2008 at 6:46 pmSudheer,
I think the reason for that is that the writers of those sites chime in on the comments and people have conversations. I don’t think it has to do with the traffic on this site.
If you came back tonight and you came back tomorrow and you had no response to your post, you may not comment next time. Sometimes you may find a couple of posts but none address yours and they don’t address each other either, its as if everyone is talking but no one is listening.
Posted by Fernando Alvarez at July 16th, 2008 at 9:56 pmLets see,
Karrraaaaaaaaa aaaaaaa aaaaaa aaaa aaa aa a a … echo echo
Nope!
Posted by Fernando Alvarez at July 17th, 2008 at 2:33 pmLet me try this,
Sudddeeeeeeeee eeeeee eeeeee eeee ee e er … echo echo
That explains it.
Posted by Fernando Alvarez at July 17th, 2008 at 7:28 pmS:
I am not sure why some sites have a lot of comments and others do not. We do plan on adding more opportunities to socialize in the future (no, good god, we are not starting an ATD social network).
Posted by Kara Swisher at July 18th, 2008 at 2:58 amF:
Ha. Ha. Haaaaaaaaaaaaaaaaaaaaaa.
Posted by Kara Swisher at July 18th, 2008 at 2:59 amI know your busy but it was great to hear from you!
Posted by Fernando Alvarez at July 18th, 2008 at 7:59 amNice piece Kara, thought I would share my 2c…
In essence I agree with your thoughts and your coverage of this topic. Display is growing at a significant rate and both for the purposes of branding and acquisition; it therefore will have broad appeal to most brands. All search engines will need to have a solid strategy on how to integrate display into their offering, and we have seen significant improvements over the past 6 months from most of the engines. The acquisition of DoubleClick has seen Google roll out Google Ad Planner and Enhanced Online Campaigns, and Yahoo has been making great progress in video ads. We have already had a lot of success running campaigns on the Google Content Network at iCrossing.
But it isn’t just market share they are after in terms of paid and display as channels.
The convergence between all forms of paid media is undeniable, and the successful campaigns of the future will be those that tie together paid search and display. Google has already been testing video units within paid search results and search re-targeting is becoming commonplace. Even though Microsoft is not lacking in this area already, Yahoo’s acquisition of Blue Lithium in September 2007 followed by Right Media, make it a very attractive target, and I am sure all publishers and networks will have their eye on the same goal – how can we offer smarter display campaigns.
Dax
Posted by Dax Hamman at July 28th, 2008 at 9:18 am