Google / Yahoo 25% pregnant for two years

The WSJ this morning has suggested that Google and Yahoo! have proposed a modification to their proposed deal which leaves it open to further review after two years and limits the total share of Yahoo! search revenue which passes through Google to 25%.

This is good news for advertisers relative to the previous positon taken by the parties. Three issues remain:

  1. On what basis will the deal be extended, expanded or discontinued after two years?
  2. What level of data will be available to advertisers from search terms bought through Google that appear on Yahoo?
  3. Why is the 25% related to revenue rather than query volume?

Our view is as follows:

  1. The evaluation criteria need to relate to the total query and advertiser volume on Yahoo! If they go up then they are meeting their stated objective from the deal.
  2. We need data at the keyword level. Today we get that from Google on google.com and from Yahoo! on yahoo.com. If we buy on Ask or AOL via Google we do NOT get data at the keyword level. If the same applies to Yahoo! advertisers lose visibility and good decision making data.
  3. The share should apply to queries not revenue. If it is on revenue the deal could operate on the most popular (head) terms and (see 2 above) significantly effect data on high click volume terms. The deal was announced as a way of monetizing the long tail of Yahoo! inventory and thus the deal should be restricted to (for example) 25% of the long tail excluding the 30% of queries that generate most clicks.

If this was the outcome advertisers and agencies would most likely be at least somewhat content and it would be appropriate to withdraw further objections in the hope that the deal spurred Yahoo! performance and increased competitiveness. Many of us have severe reservations about this and continue to believe that Yahoo! and the market would be better served by a transaction that consolidated a block of query share that enabled real competition without any Google / Yahoo! whatever its limits and gestation period.

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