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Monday, September 26, 2005

The Beginning of the End for MSN/Yahoo! Relationship

Posted by @ 11:29 pm

Microsoft has fired the latest shot in their battle for search engine marketer’s dollars. The MSN Ad Centre has been released in France and Singapore, with the US expected to follow in October.

Microsoft already has a huge advantage over other companies struggling to get into the fast growing P4P advertising space. It has the traffic to attract the advertisers, which will mean that there is immediate revenue for the company to fund ongoing development.

It is a snow ball effect, as many of the Tier 2 PPC (Pay Per Click) search engines have discovered:

  1. With significant traffic, the advertisers will be attracted to the program.
  2. Advertisers will attract other advertisers (competition).
  3. Competition means that advertisers will bid more on a term forcing click prices up.
  4. Click prices go up, attracting more advertisers and the cycle starts again.

MSN are also putting in tools to attract advertisers. The ability to target ads to various demographics (such as sex, age and location) is also going to help attract the advertisers.

What does this mean for the Yahoo! inherited relationship (with Yahoo! buying Overture) with MSN? The beginning of the end, as MSN brings all facets of their search solution in house.

For advertisers, it is yet another program they are going to have to learn the various rules and options on, albeit with some very good targeting features. As the Yahoo! pay for placement results are dropped from MSN, the ROI of current Yahoo! PPC program (Overture if you prefer) will need to be looked at by many advertisers. I would make an educated guess that in many cases, the highly converting ROI traffic is coming from MSN customers through the Overture/Yahoo! paid listings.

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