More on the Google & Yahoo Advertising deal

As previously covered- opinions in favor of and against the proposed advertising deal between Google and Yahoo are strong. Those against the deal often cite the fact that Google controls roughly 70 percent of the search advertising market, painting it as a monopoly. Those in favor of the deal have researched further to analyze the facts.

While Google does control 70 percent of the search advertising market, it does not set the pricing. Advertisers set the pricing, bidding against each other for the amount they will pay when a user clicks on their advertisement. Microsoft, Yahoo and other companies operate in the same manner. At Google advertising spots are not simply sold to the highest bidder, quality scores are also factored in. A quality score is based on the relevance of the advertiser’s destination page to the search term and the prior history. The higher an advertiser’s quality score is, the lower the price of the advertisement.

This is all part of Google’s search algorithms whose goals are to link users with the products and services they are searching for. This is also the reason advertisers are willing to pay more for a spot on Google ads, because it is well known that Google’s software and technology is more likely to produce customers who make a purchase, because the ads are strategically targeted to relevant users- and advertisers are willing to pay more to reach those users. It is also a fact that Ask has renewed its advertising deal with Google in 2004 and 2007, since its initial startup in 2002–a keen indicator that it is lucrative for and could be for Yahoo as well.

Google has a large ad inventory; it makes sense for them to find ways to disperse them among other engines. The practice of auctioning prices to advertisers is so ingrained in this business that it is clear why Google and Yahoo did not see their advertising deal as a monopoly or threat to anyone else, and assumed they would breeze through the regulatory review to which they voluntarily submitted. The arrangement is simply Google supplying ads to Yahoo, the same as they do for Ask. To read previous entries on this topic, see Blue Interactive Agency’s blog, your Fort Lauderdale interactive marketing firm.