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AOL, Microsoft And Yahoo Seeking To Form Ad Alliance

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Given the way Facebook and Google (NSDQ: GOOG) have been taking an ever larger share of display ad spending, it looks as if AOL (NYSE: AOL), Microsoft (NSDQ: MSFT) and Yahoo (NSDQ: YHOO) are looking for safety in numbers with a plan that calls for the trio to sell ad inventory on each other’s sites, AllThingsD’s Peter Kafka reports. The three have not yet had any comment on the report. All three of issued statements to the effect that there have been some ties before and the portals are exploring “future” collaborations.

It’s not clear how much inventory each of the companies will be sharing, or if it is indeed a done deal.

On the face of it, joining forces can seem to make sense. Google’s and Facebook’s display power has been rising steadily over the past year. Specifically, eMarketer says that Facebook’s share of U.S. online display ad dollars will rise to 17.7 percent this year, up from a 12.2 percent share in 2010. AOL, Microsoft and Yahoo are going to have to strengthen their sales forces to face the challenges. But more than that, the shift of audiences and the ad dollars that follow them appear to be part of a larger trend that portals will find more difficult to beat.

But ultimately, it’s hard to see what the value of the three combining sales efforts would be. There is a tremendous amount of similarity in terms of reach among AOL, Yahoo and Microsoft. So where’s the complement? In cases like Gannett’s expanded local ad sales deal with Yahoo, one can see how there is mutual benefit: Gannett (NYSE: GCI) has the local sales forces with the ties to the local businesses, while Yahoo has the technology and the ability to provide additional content that appeals to local businesses. But what can this trio offer each other that they can’t already do?

The reason Google and Facebook are eating away at the portals’ display dominance is easy: the users that advertisers want to reach are more and more easily reachable through social media sites like Facebook, not through general content offered by portals. At the same time, Google’s tight relationship with the agencies, through its demand side platform Invite Media and the Google DoubleClick ad exchange, make it a more efficient funnel for online ad dollars.

The portals are far from dead, of course, as they still attract millions of unique users a month. And the strategy lately at the portals has been to emphasize premium ad sales instead of cheaper direct response dollars. Still, at a time of economic uncertainty, that seems like a risky bet. And at any rate, the trends of have been against portals and more towards social for a while now. An ad combination of some sort could help the portals a little bit, but it’s by no means a solution to their declining potency as an online ad vehicle.

One Response to “AOL, Microsoft And Yahoo Seeking To Form Ad Alliance”

  1. If there is a content play here, this “alliance” may make sense. But it
    seems as if there are still a lot of details to be ironed out, such as how and
    why a sales person – at say Microsoft – would want to sell his/her competitors
    (Yahoo and/or AOL) inventory? And how much additional value will each company
    generate by cutting out the ad networks? At the end of the day, brands still
    need to reach their target audience for the best price possible. Microsoft,
    Yahoo and AOL will need to ensure they are delivering more value to the brands
    if this alliance is going to work. If all three had a central “hub” they could
    hook into to view one another’s available inventory, in real-time, and package
    that inventory in a unique way that delivers more value to the brand, this
    concept could work. Alignment of goals and operations will be key here!