If the blockbuster takeover of Yahoo Inc. by Microsoft Corp. is allowed to proceed, the combined company could rival Google Inc. for clout in the advertising world.
Though Google holds the undisputed crown in terms of online advertising, Yahoo and Microsoft would together form the biggest challenge to its dominance over Internet ad dollars since the industry began to explode over the past decade.
While Google focuses on connecting marketers with audiences through its online search terms, Yahoo and Microsoft's MSN portal represent mass audiences.
Like Google, people make the sites a default Internet address on millions of computers around the world.
“These are pretty heavy traffic sites,” said Scott Stewart, director of Toronto-based ad buyer Genesis Vizeum.
But advertisers don't necessarily relish the thought of one major competitor to Google, since the combined company would make the industry less competitive.
Though the $40-billion online advertising world has grown exponentially in the past five years, and is expected to double by 2010, concerns that those dollars could flow into the hands of one or two companies around the world are of increasing concern for regulators.
After Microsoft's $44.6-billion (U.S.) offer for Yahoo was made public yesterday, officials with the U.S. Department of Justice signalled that they would be probing the deal due to concerns about competition.
When they do, it is the advertising markets that will be investigated.
“In terms of total delivery of impressions in one week, does Yahoo and MSN rolled up as one beat Google? If they do [the deal] makes sense for them,” Mr. Stewart said. “But the problem is…if you only have two major vendors, it stops being a buyers market.”
The cost of buying the marquee ad spot on Yahoo in Canada is roughly $25,000 a day for placement on the upper right hand side of the company's main Web page. A minimum ad buy on Yahoo requires a budget of at least $10,000, ad buyers say.
Analysts figure the combined company would still rank second behind Google in terms of online advertising.
Though Microsoft might be smart to concede some of its search market to Google and focus on more traditional brand advertising with Yahoo by selling display ads and video, that may not happen.
“My bet is that neither Yahoo nor MSN will relinquish their search emphasis so readily,” said Shar Van Boskirk of Forrester Marketing in an online analysis of the proposed deal.
“We believe the combined Microsoft [and] Yahoo should happily take second place to Google in the search business, and focus all of its energy on brand advertising.”