Home How Will Publishers Fare Under Microhoo?

How Will Publishers Fare Under Microhoo?

By Rajeev Goel, Co-Founder of PubMatic

There has been a lot of coverage about the potential Yahoo! acquisition by Microsoft over the last week. This coverage has looked at issues such as deal mechanics, antitrust implications, and the impact on advertisers. One aspect of the possible blockbuster deal that has not been adequately examined is the impact on web publishers, in particular the medium and long tail publishers who are almost wholly reliant on ad networks to monetize their ad inventory.

In the medium and long tail of publishers, the market needs a strong and credible alternative to Google AdSense. An alternative will drive innovation in advertising, bring more advertisers on board, expand advertising internationally, and lead to better payouts for publishers. All of these trends will lead to more revenue for these publishers over time.

Short term: the acquisition will be bad for publishers

In the short term, the potential acquisition will be bad for medium and long tail publishers.

Yahoo! Publisher Network, Yahoo!’s competitive offering to Google AdSense, is an also-ran in the marketplace. It has been in beta for two years now. Most publishers that we work with wait a month after sending an application to YPN, only to have it rejected. YPN won’t serve ads outside of the US despite Yahoo!’s presence in the brand/display market internationally. Unconfirmed sources inside Yahoo! indicate that they will be re-launching YPN in the summer of 2008, but it’s entirely possible this timeline will slip as the acquisition process plays out. At the same time, Microsoft Content Ads, Microsoft’s competitive offering to Google AdSense, is in a private beta running on less than a few hundred web sites. It is hard to imagine that the merger process will accelerate delivery of either solution.

From a strategic focus perspective, it’s clear that Yahoo! and Microsoft are focused on the advertiser side of the online ad market. One of Yahoo!’s biggest development projects, Apex, is intended to integrate search and display advertising into one system for advertisers and ad agencies. Microsoft’s largest acquisition to date is aQuantive, an ad agency and digital solutions provider which is largely focused on advertisers.

Yahoo! and Microsoft can afford to focus on advertisers at the expense of publishers because they have so much ad inventory on their owned and operated web sites, which Google does not. The majority of Yahoo!’s and Microsoft’s properties are designed to keep users on their web sites, whereas Google’s main product (search) is intended to send users away, with the notable exceptions of Gmail and YouTube. comScore and UBS estimate that Yahoo! and Microsoft have more than twice as many monthly page views as Google as of December 2007. As a result, a combined Yahoo! and Microsoft would likely focus on how best to monetize their own ad inventory, and those of strategic partners such as Facebook and eBay, rather than inventory from an open publisher network.

Long term: good potential upside for publishers, but don’t hold your breath

In the long term, there is upside potential for publishers. However, it’s just that — potential — and has remained that way for several years now.

As a combined force, Yahoo! and Microsoft might see a big enough opportunity in the market to pursue industry solutions outside of their owned and operated portfolio of web sites. Yahoo! has started down this path with the Right Media, Blue Lithium, and Maven Networks acquisitions. Other media companies such as Fox Interactive Media and niche players such as Martha Stewart Living Omnimedia have started down the path of selling ads for external publishers as a way to grow their businesses. As the trend towards user level targeting increases, as opposed to web site level targeting, Yahoo! and Microsoft will need to find ways to target advertising off of their owned and operated site network.

Yahoo! and Microsoft can combine research and development budgets in a number of different areas to free up money for investing elsewhere. Within a combined entity, spending on search, email, infrastructure, etc. can all be reduced to free up money to invest in solutions that benefit publishers. In addition, Microsoft has a significant cash advantage over Google with respect to available money for investment. In 2007, Microsoft’s quarterly net income was roughly equivalent to Google’s annual net income.

Conclusion

In the short term, the Microsoft-Yahoo! acquisition process is likely to be bad for publishers. The lack of focus and investment that Microsoft and Yahoo! will have on the medium and long tail market will result in a slower pace of innovation and poorer monetization opportunities for publishers. In the long term, there is potential upside for publishers but the acquisition process, integration, and renewed product development will take a long time to sort out. The time frame involved reminds me of the old economics adage: “In the long run, we are all dead.” How long might we wait until Microsoft and Yahoo! deliver?

This is a guest post by Rajeev Goel, the Co-Founder and General Manager of PubMatic, a publisher service that automates and optimizes ad serving decisions. You can follow Rajeev at the PubMatic blog.

About ReadWrite’s Editorial Process

The ReadWrite Editorial policy involves closely monitoring the tech industry for major developments, new product launches, AI breakthroughs, video game releases and other newsworthy events. Editors assign relevant stories to staff writers or freelance contributors with expertise in each particular topic area. Before publication, articles go through a rigorous round of editing for accuracy, clarity, and to ensure adherence to ReadWrite's style guidelines.

Get the biggest tech headlines of the day delivered to your inbox

    By signing up, you agree to our Terms and Privacy Policy. Unsubscribe anytime.

    Tech News

    Explore the latest in tech with our Tech News. We cut through the noise for concise, relevant updates, keeping you informed about the rapidly evolving tech landscape with curated content that separates signal from noise.

    In-Depth Tech Stories

    Explore tech impact in In-Depth Stories. Narrative data journalism offers comprehensive analyses, revealing stories behind data. Understand industry trends for a deeper perspective on tech's intricate relationships with society.

    Expert Reviews

    Empower decisions with Expert Reviews, merging industry expertise and insightful analysis. Delve into tech intricacies, get the best deals, and stay ahead with our trustworthy guide to navigating the ever-changing tech market.