Is It the End for Yahoo Search Marketing?

With the recent announcement that Yahoo! and Google have agreed to terms over search-based advertising, many in the industry are beginning to wonder if this is the beginning of the end for Yahoo’s Search Marketing program.

The agreement, which still has to be approved by anti-trust authorities, is an $800 Million (US) deal which will see Google’s paid advertisements appear on Yahoo’s search results.

Assuming the deal is approved, and I have the impression that it will as both AOL and Ask.com are on similar arrangements with Google, then this will mean that advertisers who are signed up with the Google AdWords program will be able to get their ads to display on Yahoo’s search pages.

This begs the question, if advertisers are able to sign up to the AdWords program and control the placement of their ads in Google, Yahoo, Ask.com & AOL, why would advertisers then sign up for Yahoo Search Marketing, which is limited to just Yahoo searches?

The answer is simple… they wouldn’t.

When you throw in the fact that Yahoo Search Marketing requires a $30 deposit and pre-pay billing, Google’s AdWords becomes even more of a clear option. To make the contest even more one-sided, Google offer a whole raft of extras to assist you with your campaigns including Google Analytics, WebMaster Tools and the new Google AdPlanner.

Yahoo claim that their Search Marketing program will continue to operate in tandem to Google’s ad placements but how long will Yahoo’s users put up with double the amount of ads? My guess is that Yahoo’s Search Marketing program will simply be phased out over 12 months or so. The other more cynical option is that Yahoo will simply drop its Search Marketing program as soon as the deal is approved, and are only keeping the program running to help get it rubber stamped.

So why did Yahoo! make this deal? Quite simply… money.

Google’s share of online advertising revenue is around 80% (depending on who you believe) but Yahoo’s is only around 5%. Despite Yahoo’s best efforts they have failed miserably at stealing any of Google’s market share. In fact, they are actually losing ground.

This left Yahoo with two options; makeover their own Search Marketing program to be better than Google’s AdWords, or take the AOL and Ask.com path and simply outsource to Google. They chose the latter and one can hardly blame them. This new deal guarantees Yahoo! a stream of online advertising income but tightens Google’s grasp on the search marketing market.

It’s no wonder that this kind of deal has drawn interest from the anti-trust authorities but if it is approved (as I suspect it will) then there is strong evidence that this is the end for Yahoo’s Search Marketing program. Once again it looks as though it’s going to be Google v Microsoft.

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