Ad deal quandary: better Google the answer

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Ad deal quandary: better Google the answer

By Julian Lee

IT’S NOT often that when people say it’s business as usual they really mean it. But for the Australian divisions of Microsoft and Yahoo! — which are digesting what the global tie-up announced on Wednesday means for the two companies — it is probably true.

Australia is one of the few countries where Yahoo! already sells ads against queries entered into Microsoft’s search engine.

Under the terms of the deal announced in California, Microsoft will provide the underlying search technology on Yahoo! sites, leaving Yahoo! to sell ads against search queries. Yahoo! gets 88 per cent of the search-generated ad revenue from its own sites for the first five years of the 10-year deal and will benefit from about $US275 million ($A335 million) extra operating cash flow a year.

Both parties said the tie-up would provide an alternative to Google, which has 78 per cent of the search market worldwide, and 92 per cent in Australia.

It marks the end of a long, and at times painful, dalliance between them, with Microsoft making an unsuccessful $US47.5 billion bid for Yahoo! last year.

As the companies prepare to plead their case with regulatory authorities, those agencies that spend $700 million buying space in directories and searches in Australia are weighing up what it will mean.

‘‘It’s a very strange position to be in,’’ said Rob Marston, director of search at media agency Starcom. ‘‘I don’t think it is as clear-cut here as it is in the United States and Europe.’’

The anomaly facing Australian advertisers was created when Microsoft turned to Yahoo! in markets that were not serviced by the former’s ad-serving platform, Adcenter.

John Murray, Mitchell Communication Group director of digital, said the strength of the deal rested on Microsoft’s ability to convince internet users to switch from Google to its own Bing. ‘‘If they can convince people that Bing is as good as Google, then there’s a chance. But at the moment it’s safe to say that more people look for more things on Google than anywhere else.’’

Even the Australian arm of Yahoo! was unsure what it all meant. A Yahoo!7 spokeswoman said: ‘‘These kinds of deals can take … years to roll out. We are working through what this means for the Australian market. Until then it’s business as usual.’’

According to Nielsen, of the 10.3 million people searching online in June, 9.8 million of them used Google, 2.1 million used Microsoft’s Bing, and 1.5 million used Yahoo!7.

Mr Marston said: ‘‘[Microsoft] has done an excellent job with Bing and it has created real competition. They may not take [share] initially but over time they will.’’

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