Thoughts on a Google/Yahoo Search Deal

TechCrunch posted the following article about Google serving ads against Yahoo search results. Everybody seems to have their own opinion about the pros and cons of such a deal. Microsoft will obviously be pushing the Department of Justice to take a nice and steady look at possible monopolistic overtones to the deal.

Because of Google's mammoth ownership of the search advertising market, it's easy to see why anyone inside of Google or Yahoo would be in favor of it. Google is currently spinning the issue saying that the partnership will lower ad prices Really? How? It will essentially direct advertisers to a network that (after the deal is completed) will own upwards of 90% of the search advertising market, taking away competition, and by definition force the price of keywords and keyword phrases up.

The problem with not just search advertising but online ad networks as a whole is the lack of quality competitors in the space. Granted, there are now over 300 ad networks competing for a piece of the $16billion online ad market. The trouble is not one of them has shown the capability or the determination to produce a product capable of effectively competing with Google.

Unfortunately, a good product is only half the battle. Many companies out there have developed good ad networks, it's just that a) the management is under-prepared for a long fight with Google, b) the product they built can't scale, or c) the company lacks the discipline or the expertise to successfully execute putting another product in play with mainstream advertisers.

Thoughts on SocialAds

Facebook announced yesterday that it will start a new stealthy art of advertising called SocialAds. The point of the platform will allow its 50 million members to become the new advocates for high profile brands such as Verizon, Blockbuster, and other mainstream brands.

The new platform allows these companies to do the following:

- Build profiles around their brand - nothing new here, this has been going on for a few years at MySpace, and was even in beta testing mode at Facebook with its Sponsored groups function.

- Insights will allow advertisers a more in-depth look at how their consumers and target markets behave online. Because Facebook collects such a comprehensive amount of data when a user registers for its site, this information will be extremely valuable to advertisers, more-so than on other social networking sites, where a buying a banner ad would be a shot in the dark. Advertisers will now be able to target not only to traditional demographics, but will be able to go as far as to where a user graduated from, what Facebook applications they are using and who their friends are. All of this, of course, will no doubt raise privacy concerns from industry watchdog groups.

- Beacon is the most interesting part of the platform because it allows users to tell their friends when they visit and purchase on a partners website. Imagine for a moment that you just bought Gucci Sunglasses off of eBay. That transaction will now show up in your news feed on Facebook. Taking this a step further, let's assume that you and your friends are planning a quick trip to Cabo for Spring Break and you want to let them know where you received a great deal. If the airline you purchased your tickets from is a partner of Facebook, that purchase will show up in your news feed.

What Facebook is doing has the potential to revolutionize the industry. If done correctly, they could do for social networking what Google did when they launched AdWords. This new platform is bound to have a dramatic effect not only in online advertising, but advertising across all spectrums.