It’s a “corner the market strategy" in on-line ads that just might work. Today Yahoo!, Microsoft and Amazon joined in an Internet troika with hopes that ad sharing among their respective customers will boost both efficiency and revenue, creating a virtual “Maginot line” of defense against the Facebook and Google advertising onslaught.
But can a unity and customer sharing strategy stand up against the power of social networking technology, delivering online ads on a rocket ship growth trajectory that’s gone from US$ 145 million in 2007 to a projected US$ 2.01 billion by the close of 2011, eclipsing market leader Yahoo in the process?
By the Numbers
Currently, eMarketer shows US display ad revenue numbers for Facebook growing at 66.6%, to US$ 2.01 billion by the close of 2011 from a whopping 117.8% in 2011. More important, this growth is on track to surpass long-time market leader Yahoo! this year. Yahoo! will produce an estimated US$ 1.62 billion in US display ad dollars on growth of just 13.6%, according to eMarketer.
Meanwhile, rival Google should hit close to US$ 1.15 billion, but the combined 2011 ad revenue estimate with AOL (US$ 0.5 billion) and Microsoft (US$ 0.6 billion) added to the Yahoo! numbers will create an ad market behemoth claiming US$ 2.7 billion in total display ad revenue or a whopping 42.8% market share, by the end of this year.
Mega Ad Network
The group of three announced that the agreements will allow ad networks operated by Yahoo!, Microsoft and AOL to offer each other’s premium non-reserved online display inventory to their respective advertising customers, which will “…enhance the demand for and value of each party’s display advertising offerings and provide better yield for both participating publishers and advertisers,” the group said.
By integrating one another’s real-time bidding (RTB) technologies to facilitate the availability of non-reserved inventory by early 2012, Yahoo!, Microsoft and AOL said they expect to have the opportunity to gain access to each other’s non-reserved inventory. This will boost benefits in both scale and efficiency.
The Microsoft Advertising Exchange and Yahoo’s! Right Media Exchange will initially serve as the two marketplaces where partners can procure this inventory for resale to advertisers and agencies. The group also said AOL may, at its discretion, opt to use its own exchange technology solution subsequent to the launch of the partnership.
Keep in mind that the Yahoo! Network Plus, AOL Advertising.com and the Microsoft Media Network have unique approaches (and strengths) to advertising, based on respective capabilities around data, optimization, packaging and inventory. “The fact that we’re joining together to offer this kind of access to quality -- yet each with our own differentiated ad offerings -- is something that will benefit the market as a whole,” according to Rik van der Kooi, corporate vice president of the Microsoft Advertising Business Group.
Ned Brody, chief revenue officer, AOL said, “This should reduce friction in the marketplace, which will benefit both advertisers and publishers. And this partnership will take our existing Advertising.com partnerships with both Microsoft and Yahoo! to a new level.”
But the partnership has more to offer in the efficiency of the media buy. That is buying premium display inventory at scale, with a much broader reach to customers and audiences, and “…sets in motion the opportunity for advertisers to achieve scaled solutions across premium publishers,” Brody said.
It’s not so much the growth of rivals like Google, dominant in the search engine ad space with 75% market share, but rather “…a significant shift in how inventory is bought and sold,” Microsoft’s van der Kooi said. "We’re now 100% focused on controlling our own destiny, working directly with marketers and agencies and driving better returns for our advertising partners.”
United But Separate
Under the terms of the nonexclusive agreements, each company will continue to make its own decisions, differentiate its offerings and set its own controls for how it operates any exchanges, ad networks or other aspects of its display businesses. They will actively compete with each other for both advertiser spend and publisher partners based on their own unique product differentiators.
The group announced that, effective in the United States, the partnership is based on the premise of audience-based selling across a large number of sites and is not expected to affect direct sales made by each partner’s respective internal teams. In addition to the United States, Yahoo! and AOL will have an agreement that extends to Canada. Microsoft's Canada business is not participating directly in the agreement.