Yahoo, Google Buddy Up for Display-Ad Deal

Yahoo and Google on Wednesday announced a nonexclusive agreement to display ads on various Yahoo properties and certain cobranded sites using Google’s AdSense for Content and its AdMob services. Because the agreement is nonexclusive, Yahoo will continue to display ads from other providers, including Microsoft’s Bing.

The agreement has been widely hailed as a smart move for both companies.

“In a world where the inventory is limitless and the eyeballs finite, the opportunity to drive those eyeballs across as many sites as possible is one that can’t be understated,” Rich Hanley, associate professor and director of the graduate journalism program at Quinnipiac University,” told the E-Commerce Times.

And the Loser Is…

With the agreement, Yahoo will be able to offload some of its unsold inventory and expand its network. Google will bring in more revenue.

The move means more revenue for Yahoo as well, noted Charley Polachi, a partner at Polachi Access Executive Search.

“Mayer needs to create revenue to maintain momentum and build the market cap — it is what her stakeholders demand and it is what her job is really all about,” he told the E-Commerce Times.

“It’s just another day in the salt mines for a tech CEO,” Polachi quipped.

“It’s a win for everyone except Microsoft,” Larry Kim, founder and CTO of Wordstream, told the E-Commerce Times. “Users will see ads that are more relevant to their interests. Yahoo and Google will make more money as more people will click on those display ads. Advertisers benefit greatly from [expanding] their AdSense network.”

In short, both Yahoo and Google are getting something they need or want with this deal, despite their competitive relationship — and despite the fact that Yahoo once struck a similar relationship with Microsoft to better compete against Google.

A New Definition for ‘Coopetition’

If this sounds like a realistic laying-down-of-arms agreement between two competitors, that is because it is — and it is due in large part to Yahoo’s new direction under Marissa Mayer.

“The deal says a lot about the pragmatic new management style of CEO Marissa Ann Mayer,” Andreas Scherer, managing partner of Salto Partners, told the E-Commerce Times.

“Yahoo wasn’t able to compete with Google all by itself in this space. Its alliance with Microsoft didn’t take off. Mayer did the next logical decision — she joined forces with a company that cannot be beat at this stage of the game,” he explained.

AdSense’s infrastructure “well-oiled machine” makes Google the company to beat in the search business, Scherer continued. “With this deal, Yahoo is able to tap into a revenue stream that it hadn’t been able to create on its own, nor access through its partnership with Microsoft.”

There may be antitrust concerns raised due to Google’s overwhelming position in the marketplace, but assuming it holds up, the deal is destined to become a textbook case of “coopetition” — a strategy that allows companies to cooperate in certain areas while competing in others, he noted. “This step allows Mayer to focus on areas in Yahoo that need more attention.”