CONTACT US
Search Engine Marketing Group
303 Second Street
South Tower, 9th Floor
San Francisco, CA 94107
415-615-0710 x226
Email Us
http://www.jwtsc-seo.com
IN THE MAY ISSUE...
GOOGLE'S DOUBLECLICK STRATEGIC MOVE
Catherine Holahan, Business Week, 05/13/07
Three billion dollars? On Apr. 13, Google announced that it would pay $3.1 billion for the advertising outfit DoubleClick. Just two weeks ago, as reports surfaced that the company could go for $2 billion, the price was considered lofty but justifiable. Now, Google (GOOG) is forking over 20 times DoubleClick's estimated revenues of $150 million. And it's paying triple the amount that private equity firm Hellman & Friedman spent when it purchased DoubleClick in 2005—before selling off a couple of pieces of the business.
So why the sky-high price? It may be less a function of DoubleClick's current worth and more about what it can strategically provide for Google—and what it could have done for Microsoft (MSFT), a rival bidder (see BusinessWeek.com, 4/3/07, "Google vs. Microsoft: Vying for DoubleClick").
DoubleClick has something that Google, for all its money and smarts, doesn't: a vibrant advertising business for banners, videos, and other so-called display ads often intended more to promote brands than to generate immediate sales. "DoubleClick currently has relationships with virtually every major online publisher and more than half of the online ad agencies," says Dave Morgan, chairman of TACODA, a targeted advertising network. DoubleClick counts Time Warner's (TWX) Sports Illustrated, Friendster, and Viacom's (VIA.B) MTV Networks among its customers. Google, on the other hand, has made much of its billions by serving tiny text ads related to searches for relatively smaller businesses hoping for some kind of immediate interaction with a customer.
The Smart Play—the Only Play
Forrester analyst Charlene Li described the deal as a must-have for Google. "It's a lot of money, but who cares? This is one of the things they had to buy," she says. "They were not making any headway" on display ads.
In a call following the acquisition announcement, CEO Eric Schmidt characterized the deal as helping Google gain a greater foothold in the display advertising market. "It is accelerating our display advertising business," said Schmidt. So far, search rival Yahoo! (YHOO) has been the main player in display advertising on the Web. Google's display efforts to date, like its attempts to expand outside of search in general, have been marginally successful at best. "Google has been a one-trick pony for a long time focusing on just search," says Bill Gossman, CEO of targeted advertising network Revenue Science. "This is a way to give them another trick."
Google clearly thinks that trick could be a multibillion-dollar one in the near future. During the call, Schmidt and Google co-founder and Technology President Sergey Brin emphasized the importance of display advertising. "I think we have thought that display advertising has been important for several years," said Brin. David Rosenblatt, DoubleClick's CEO, told BusinessWeek.com that the market could be equal to—or even bigger—than paid search. "We could see a similar kind of growth rate as search had," says Rosenblatt.
Banner Potential for Display Ads
Paid search advertising will account for more than 40% of the $19.5 billion expected to go to online advertising this year, according to a Mar. 7 eMarketer report. Google grabs about two-thirds of the search advertising market. Much of that growth has stemmed from the ability of search engines to find consumers who have demonstrated an interest in a certain product.
Display advertising, which is often broken up by the medium, has not been as vibrant as search in recent years. In an October report, eMarketer put the display advertising number at $3.34 billion for 2006 and expected it to grow to $4.5 billion by 2010. Meanwhile, paid search advertising accounted for $6.76 billion of online ad spending in 2006 and was projected to grow to $10.3 billion by 2010.
Gossman believes that display will grow faster than expected because of increased targeting capability. Display advertisers have typically sought to place their ads on pages where the content is related and thus likely to attract interested consumers. For example, an SUV marketer would stick a banner on an autos site. Ad networks and search engines such as Google can now target banner ads to customers who have demonstrated an interest in content related to the ad, even if the page has nothing to do with the advertiser's product, says Gossman. As a result, brand advertisers are becoming increasingly interested in display ads, says Gossman. In fact, Gossman and others believe that display ads are poised to begin taking advertising dollars away from the television advertising market.
Microsoft's One That Got Away
Rosenblatt says that DoubleClick will gradually start to leverage Google's targeting capabilities with its customers. Google's ability to match ads with consumers will be particularly helpful for publishers that have inventory they can't sell through their in-house sales force, says Rosenblatt.
The other big benefit of buying DoubleClick for Google is keeping it out of Microsoft's hands. At the moment, Microsoft poses little threat to Google's search advertising business. Its share of Internet searches has been on the decline and dropped to less than 10% in March, according to an Apr. 11 Hitwise report (see BusinessWeek.com, 4/2/07, "Where Is Microsoft's Search?"). As a result, advertisers looking for the biggest potential audience go to Google, not Microsoft.
DoubleClick could have changed that for Microsoft. DoubleClick serves ads on both Time Warner's AOL and News Corp.'s (NWS) MySpace, two of the Web's most popular properties. Google has the rights to provide search ads on both those sites—it bid aggressively to do so, agreeing to pay nearly $2 billion to both companies (see BusinessWeek.com, 8/8/06, "Google Gets Back into MySpace"). But if Microsoft had acquired DoubleClick, it could have had a competitive position at the two companies, jeopardizing Google's expensive search agreements. It could also have given Microsoft a much greater search share. "Microsoft definitely needs agreements for search advertising," says Matt Rosoff, an analyst at Directions on Microsoft.
Even More Power for Google
In the end, however, getting a greater search share just wasn't worth $3 billion-plus for the software giant. "Maybe they would have looked at the acquisition at a lower price, but you have to look at Microsoft's overall business and what they could have spent that money on," says Rosoff. "It is much more important for Google—advertising is their core business."
To advertising industry executives, such as Gossman and Morgan, Microsoft's unwillingness to pay such a price showed that the company isn't as serious about the market as Google. "Google is really serious they want to dominate digitally advertising and they don't want to lose," says Morgan. "Google has no intention of losing."
But is a win worth $3.1 billion? It just may be—provided DoubleClick's valuable clients are not scared away by the presence of the increasingly powerful Google. That's a big if. On the conference call, some analysts raised the specter of antitrust authorities not approving the deal. (Both parties don't feel it's an issue.) And already, many media companies, some of whom are DoubleClick clients, have been vocally wary about Google's increasing strength in the advertising industry and its aspirations to become involved in offline ad delivery (see BusinessWeek.com, 4/9/07, "Is Google Too Powerful?").
Rosenblatt says that he is excited about the prospect of using DoubleClick's relationships and Google's targeting to sell offline ads in the future. He also believes that DoubleClick clients will see the deal not as a threat, but as a tool that makes advertising easier. "I think they will see this as a best-of-breed combination—the leading platform technology provider and the leading monetization engine."
With Robert
Hof and Arik Hesseldahl.
Holahan is a writer for BusinessWeek.com in New York.
MICROSOFT-YAHOO DEAL: NOT IF, BUT WHEN, ANALYSTS SAY
John Blau, Computer World, 05/03/07
Reports that Microsoft Corp. and Yahoo Inc. are in talks over a possible acquisition or merger have come as anything but a surprise to analysts who question not if, but when, a deal will happen.
Microsoft and Yahoo, which have held informal merger talks in the past, are at the negotiating table again, driven largely by the rising dominance of Google Inc. in the online advertising market, The New York Post and The Wall Street Journal reported today.
Yahoo didn't immediately reply to phone and e-mail requests for comment. A spokeswoman for Microsoft said the company doesn't comment on rumors.
The possible early-stage negotiations over an acquisition, a merger or some other type of deal come on the heels of Google's move last month to snatch up online advertising powerhouse DoubleClick Inc. for $3.1 billion.
Discussions between the companies are not news to analysts.
"The talks are real," said Greg Sterling, founding principal of Sterling Market Intelligence. In the wake of the Google-DoubleClick deal, both Microsoft and Yahoo need to do something "radical," he said.
"An alliance wouldn't satisfy the market," Sterling said. "The market wants a 'game-changing' move. On paper, an acquisition looks good."
Google is the enemy, and the sooner Microsoft and Yahoo respond to the Internet giant's growing online presence, the better, according to Rob Enderle, president of Enderle Group.
"Both companies are struggling to compete with Google, which has become incredibly powerful in the Internet advertising space," he said. "This is a competitive response to the amount of power that Google is collecting."
Enderle noted that while "big deals like this could be tough," "Yahoo's numbers aren't good, and this could put pressure on the company's executives to consider a deal."
A move to hook up with Microsoft could also help Yahoo catch up to Google on the "perception" front, according to Jennifer Simpson, an analyst at Yankee Group Research Inc. "Yahoo, although seen as a viable competitor to Google, is not at the top of many people's minds anymore in terms of being a competitor."
Most analysts see more advantages than disadvantages of a tie-up between Microsoft and Yahoo.
"What Yahoo has and Microsoft really doesn't is a foothold in the Silicon Valley community, which is becoming increasingly important for acquisitions, development and getting the word out," Simpson said. "This partnership would bring that to Microsoft."
Microsoft also stands to benefit from Yahoo's online expertise. "Microsoft is essentially a technology company that has been focused on its Windows and Office software products," said Emily Riley, an analyst at JupiterResearch LLC. "Yahoo is very different; it's an Internet company through and through."
But analysts are also quick to point out that a deal between the two companies could pose some huge challenges.
"Integrating the workforces, the different corporate cultures and technologies will not be easy," said Sterling.
And then there's the "size" issue, according to Simpson.
"There is a certain hesitancy already about Microsoft's hold in the market, particularly in the software market," said Simpson. That could be a concern "if it goes out and buys a large Internet property like Yahoo."
INTRODUCING [ASK SPONSORED LISTINGS] CONTEXTUAL SEARCH
Paul Vallez, Official Ask.com Search Blog, 04/25/07
It's no longer a rumor and definitely not a beta launch. Today's announcement of the Ask Sponsored Listings contextual product is the real deal. First came Ask Sponsored Listings (ASL) 1.0 in August, 2005. Next came ASL 2.0 in October, 2006. Now comes the next innovative product offering with the Ask Sponsored Listings contextual product launching in less than four weeks.
How is this product different from our competitors, you ask? Three important reasons, each one a paradigm shift:
* It gives publishers
more control over yield and relevancy
* It gives publishers more creative ad unit opportunities
* It allows both advertisers and publishers more control over where and
what ads are displayed
We'll be working with publishers to customize their implementations with some of the following options:
* New customized
relevancy thresholds for publishers
* Innovative yield management thresholds that allow publishers to optimize
their monetization efforts
You won't find the standard white background with text ads. Our hybrid text + graphical contextual units will offer a fresh new look to performance based contextual advertising.
Back to the labs for us. Stay tuned for more new product updates from the Search Marketing product team.
Cheers,
Paul Vallez,
Director of Product Management
Search Marketing
IAC Advertising Solutions
WEBMASTERS CAN NOW AUTO-DISCOVER WITH SITEMAPS [VIA ROBOTS.TXT]
Priyank Garg, Official Yahoo Search Blog, 04/11/07
Since working with Google and Microsoft to support a single format for submission with Sitemaps, we have continued to discuss further enhancements to make it easy for webmasters to get their content to all search engines quickly.
All search crawlers recognize robots.txt, so it seemed like a good idea to use that mechanism to allow webmasters to share their Sitemaps. You agreed and encouraged us to allow robots.txt discovery of Sitemaps on our suggestion board. We took the idea to Google and Microsoft and are happy to announce today that you can now find your sitemaps in a uniform way across all participating engines. To do this, simply add the following line to your robots.txt file:
Sitemap: http://www.example.com/sitemap.xml
Please provide the complete URL for your Sitemap on this line. We will pick it up wherever you put it in your robots.txt file. This directive is not specific to user-agent. If you have multiple Sitemaps, you can point to your Sitemap index file on this line. Details about the Sitemaps protocol including this addition are available on the protocol website -- http://www.sitemaps.org.
If you prefer, you can continue to issue Sitemaps to Yahoo! Search by simply inputting the URL for your Sitemap and submitting. Or add feeds to a site you are already managing under 'My Sites' in Site Explorer. This also allows us to provide more feedback to you about what we are doing with the sitemap.
We're also happy to have some east coasters, Ask and IBM, announce their support for Sitemaps. The more the merrier!
We'll also be sharing more this week at SES NY.
If you have other thoughts about how we can collaborate with other search engines on standards such as robots.txt, we'd love to hear from you -- visit our suggestion board.
Priyank Garg
Product Manager, Yahoo! Search