Analysts continue to unpack the ramifications of last week’s deal between Yahoo (NSDQ: YHOO) and Google (NSDQ: GOOG). First it was the antitrust perspective, which we discussed this morning. This afternoon, JPM analyst Imran Khan hosted a call with Kevin Lee, CEO of search marketer Didit.com to get a sense of how the deal might change the game. To start off, they touched on a couple things on the overall market: search spending on a same-advertiser basis is up modestly in the quarter (about 3-4 percent), though there’s a lot of volatility among those advertisers that hasn’t been there in past quarters. On Google, Lee compared them to a “steamroller” continuing to grab marketshare from the rest.
Now with the deal: Search marketers have reason to expect to spend more. Said Lee: “Even if it’s just the status quo… Yahoo is making a decision based on monetization.” Basically, if Yahoo is choosing between a Panama-borne ad and a Google one, they’ll pick the one that pays them more. Presumably that’ll be the Google one a lot, hence the whole justification of the deal. Note this doesn’t necessarily mean a worse ROI if the ad is better targeted and makes more sense. Lee did take issue with a Google blog post predicting no movement in prices, saying: “It’s too early to tell how the new ecosystem will react.”
So is Yahoo slouching towards irrelevance? Lee says no: “There’s all sorts of scenarios where you could see wanting to keep your Panama account open.” The obvious is that not all search queries will end up being turned over to Google. Also he described complex-sounding scenarios where a marketer may wind up bidding against themselves, one could raise their bid for a certain keyword via Panama, winning an ad slot, but still not paying as much as if the ad came in via Google. (Yes, that’s kind of esoteric, and not the most comforting explanation of why Yahoo search advertising remains relevant on its own.)
Even Microsoft (NSDQ: MSFT) remains somewhat relevant. Despite its minimal share of the market, it still gets enough action for big marketers to pay attention. That doesn’t change with this new deal.