Money for Nothing, and Your Clicks for Free

Om provocatively suggests that the impending competitive war in cost-per-click ad services — Yahoo, Google, and Microsoft all want to be clicked — is likely to drive down keyword prices, to the detriment of all involved. Except advertisers, of course, who will revel in the soon-to-be rapidly diminishing cost of clicks.


  1. how do you have a price war in something that is auctioned off?

  2. Okay, loose and somewhat hurred language on my part. Meant a competitive war, the upshot of which will be less valuable keywords spread across multiple ad services.

  3. As I commented over at Om’s, it probably won’t change the price of keywords at all, since, yeah, they’re set by an auction. On the other hand, Yahoo and Microsoft will probably try giving publishers are larger cut of receipts (lim x–>100%?) in order to lure them away from Google. So good news for publishers, probably slightly positive for advertisers (since they’ll each try providing for value in terms of better measurement and higher conversion), and bad for Google. Though if MSFT and YHOO gain no traction, it won’t matter to Google at all.

  4. I don’t even see how publishers can get a bigger cut – because for the most important inventory: the search inventory – the publishers are Google, Yahoo, and MSN.
    Maybe at the margin, MSN and Yahoo could pay more TAC to the likes of AOL, but they seem to have bungled that mostly so far. Plus it’s just not that significant in volume now.
    As I predicted late last year, the splitting of Yahoo’s inventory (i.e. MSN taking back MSN) and the introduction of new ad systems is really giving Google a great year in which to build a huge lead.
    The buyers are gonna spend their money and time on the search engine with the *good leads*. That’s google because they have a MASSIVE inventory advantage.

  5. Joe, I think you nailed it. Publishers should be the winners in the impending ecosystem war (“hey, advertisers, your ads go on these 25 gazillion sites!). Sadly, Ballmer has the strategy totally backwards:
    His “advertisers, advertisers, advertisers” mantra should be “publishers, publishers, publishers”.
    For what it’s worth, my December 05 take:
    “What keeps Google in the game? The reach that its contextual advertising engine offers advertisers and the attractive revenue sharing terms it offers third-party publishers. So what happens when a competitor with credible technology offers third-party publishers better terms, which is to say more revenue, to carry its advertisements? A payday for publishers.”

  6. Franklin Stubbs says:

    Maybe what you have, then, is publishers reveling in significantly higher payouts per click, rather than advertisers getting lower cost per click.
    The important real estate, it would seem, is a site like this one… Microsoft and Yahoo’s job is to catch up with Goog’s diffuse network of publishers, ’cause inventory is a function of publishers as well as searches, no?
    Paul, what it would take for you to trade in your Google Ads for Microsoft or Yahoo Ads? That’s probably the question… and what would happen if MSFT ran a subsidized program where they were literally paying out more than they took in for each click, just to win over bloggers and chap Google’s ass?

  7. I’m developing a business model to reach early adopters with a simple system for investing in retail fixed income. As a learn more about the various ad systems and revenue models it appears that Microsoft’s new structure of serving ads based on viewer demographics or interests could be very powerful. It mirrors the model that is used by the mainline advertising business …where the really big bucks are…the use of search based ads presupposes the user knows how to describe something…rather than the more emotive approach of much mainline advertising…think of how much financial marketing is done to retail investors…the happy retirees on the beach…you can’t really write a search ad for that…