Google and Yahoo are right – for now

GroupM’s search team has conducted extensive analytics regarding the performance of Google and Yahoo in delivering returns to advertisers from the long tail of key words. We have verified, as the parties claim, that performance on the most popular keywords is comparable but that Google delivers with greater efficiency in the tail.

As a consequence it is likely that allowing Google to sell advertising against those tail terms to their huge pool of advertisers will create a benefit to both Yahoo and those advertisers. On the face of it, therefore, there is no reason why the deal should not proceed.

Our concern, and that of many large advertisers, is that the proposed arrangement does not necessarily represent a long term status quo. As a result of the deal the Google machine learning will become smarter over time and may result in improved performance relative to Yahoo across a much broader range of terms than those that are currently being considered. In that case it is not hard to imagine Google progressively increasing share and eventually turning its dominant market share into a monopoly position.

In the event that this scenario comes to pass the story changes. It is not strictly accurate to sit behind the claim that auctions mitigate against monopoly power when the ‘auctioneer’ has the ability to control reserve prices (or minimum bids) or when it controls the supply of inventory (the number of ads on the page), nor when the winning bid is determined by factors other than the the highest price (the Google Quality Score).

For these reasonsit is incumbent on the regulators to receive undertakings from the parties in respect of an exact definition of those terms available to Google and a commitment to ‘so far and no further’ and,most likely,to maintain some oversight on the pricing mechanisms throughout the Google system.

Being the gateway to the online exeperience and the controller of huge market share comes with responsibilities that exceed those usual for a commercial enterprise and Google needs to reassure the community that it is open to oversight and that the purity of the auction is both transparent and maintained.

1 Comment

Filed under The world we work in

One response to “Google and Yahoo are right – for now

  1. Tails, goals or strategies ….. the long and the short of it …. Google wins.

    Google’s stated objectives, in and of themselves, can be cautiously considered idioms!

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