Yahoo! Google - Tactics vs. Strategy

It’s certainly possible the YHOO made the right decision with regards to their newly announced Google deal. They’re smart folks who obviously have deep domain knowledge of their business. Of concern, though, is that this is a tactical but not strategic move. If they were punting on search because they couldn’t match GOOGs ability to capture/structure data that could be a fair concession — they’ve outsourced search tech since the beginning (recall Inktomi et alia).

But, as a content + services company, that relies on monetization, punting to temporarily gain higher CPMs seems like it could hurt them to the core. Offline metaphors are dangerous since the web really is different. But, if News Corp [NWS] through its sales channel and ad inventory position could get higher effective rates than Viacom [VIA], should VIA offer up its inventory? Doesn’t this continue to weaken VIAs relative position? The web isn’t a zero-sum game, YHOOs inventory position is variable, taking more revenue with higher CPMs allows YHOO to invest in other aspects of their business — these elements could make a collection of tactics add up to a successful strategy.http://www.hum.aau.dk/~bovbjerg/steinway.jpg

But I think this will undermine their overall advertising position since many of the dynamics that made it difficult for them to compete in search advertising will continue to make it difficult for them in display advertising. There are differences between search and display. But the factors that contribute to GOOGs ability to achieve higher CPMs for search (massive base of advertisers, great contextual ad serving, good campaign management tools) will be utilized to build their display business. My concern is that the millions of businesses that might have used Panama for search and could be upsold into display will just focus on Adwords and, to use a hackneyed expression - sometimes companies move the piano bench when it’s the piano that needs to get moved.

bill
blog.workhound.co.uk