What Search Needs Is Healthy Competition
It's not exactly on the ropes, but Google is in a position that invites competition. With the government scrutinizing its dominant stake in online advertising, the time may be ripe for another look at a Yahoo partnership with Microsoft or News Corp.
01/10/09 4:00 AM PT
As Google continues to overwhelmingly dominate the search space, and with the Department of Justice just looking for a reason to file antitrust lawsuits, it is safe to say that any serious competition to Google would be widely accepted. Serious competition to Google would have to come in the form of a consolidation among competitors. Google is just far too dominant for a startup to come out of nowhere and compete.
Consolidation among search engines would most likely result in a price war, decreasing ad costs and accelerating technology. Google's competition would most likely come from a Yahoo/Microsoft or Yahoo/News Corp. merger. When one of the new words that came out of 2008 was Microhoo, one can only assume that Microsoft is by far the most likely partner for a Yahoo merger. However, News Corp. could equip the new entity with a plethora of big advertising options in both online and off line.
First, in order for this to work, we need assume that the two biggest hurdles to a merger could quickly be overcome. Those would be, cultural/technical integration and a dramatic improvement of their ad platform to compete with Google. The beauty of Google's ad platform lies in the functionality that it offers. It is far better than that of Yahoo and MSN. When Google set out to develop its platform years ago, it realized that the easier it could make it for anyone and everyone to setup their own account, the more money it could stand to make.
Anyone who works in an agency paid search department will tell you from experience that when they take over campaigns from new clients, they are exposed to poorly set up operations. Typically, just through resetting the account and tweaking a few things, it is possible to save clients tens of thousands of dollars with their ad spends.
Because Google has made it so easy to set a campaign up, many non-technical, unqualified people end up running these campaigns within companies. Some of the worst cases that one will see come from SMB owners, but even large companies often times have poorly set up campaigns that are just bleeding dollars and inefficiencies.
Google, in making its advertising platform dummy-proof ensures inefficiencies by enabling anyone and everyone to create an account and spend money. This in turn puts more money in Google's pocket. On the other hand, it also has enabled many SMB owners to experience the benefits of online marketing that they otherwise may not have been able to afford if they had to pay an agency to do so.
Anyone who wants to compete with Google needs to greatly improve their technology. Not only for serving up the most relevant ads, but also an easy to use and powerful interface for advertisers to use. Any sort of merger that has the purpose of competing with Google must include a significant investment in better technologies.
An additional benefit that a competing entity could leverage against Google would be an accelerated path to offering integrated advertising campaigns. This would come in the form of offline advertising and online media to coincide with the search marketing, all within the same platform.
Creating a one-stop shop for advertisers is not a new idea, but it certainly is a good one. Google has already headed in this direction with its offerings of print, radio, and TV ads. Striking a deal with a major portal could easily happen and would greatly enhance competitiveness. Yahoo currently has a large online media offering and with the power of a Microsoft or News Corp. (which owns Fox Interactive), it could offer a much better online and offline advertising venue than Google currently does.
A new and better marriage of online and offline advertising could also give the new competing entity enough eyeballs to compete with Google's massive share of the search advertising industry.
Although Google would still have a dramatic market share advantage among search engines (61.9 percent comScore July 2008), a Yahoo and either Microsoft or News Corp. merger would give the new entity a large advantage in unique visitors. With Google at 144,738,000 and Yahoo close behind at 141,549,000 (comScore August 2008), adding an entity such as Microsoft or New Corp. would allow the new entity to be very competitive.
Competition = Price Wars
So far we have established that a consolidation is plausible, that with the right technology the new entity could attract many new advertisers and their dollars, and that the competing entity could provide similar traffic volumes to that of Google's, let's talk about the impact on advertisers and ad prices.
Increased competition in the online ad space would no doubt be beneficial for advertisers. This is abundantly clear with the recent announcement by Google that they are backing out of their deal to serve their ads on Yahoo's network for fear of Department of Justice antitrust lawsuits. The DOJ cited that the deal "denied customers the benefits of competition."
These "benefits" for customers would come in the form of lower ad prices, a race to develop better ad serving technologies, and possibly a better integrations of online and offline advertising. All of which will only benefit customers by offering a comparable alternative.
It will not be an easy task to compete with Google but I have to believe that everyone, including the government, would support that competition. The government is leery of the how large Google has become and antitrust lawsuits are currently the only way that it can do anything about it. I also feel that advertisers would be willing to try out a new service, especially if the technology was easy to use and the reach close to that of Google's.
Miguel Salcido is the VP of Operations at eVisibility, an Internet marketing firm based in San Diego, Calif.