Facts about the Yahoo-Google advertising agreementFacts about the Yahoo-Google advertising agreementIn June 2008, Yahoo! and Google announced a non-exclusive advertising agreement that will provide Yahoo! with access to Google’s AdSense advertising programs on their U.S. and Canadian web properties. The deal lets Yahoo! use Google’s advertising technology to provide more and better ads, benefiting advertisers, publishers, and consumers. There has been some recent discussion about the potential impact of the agreement. Here are the facts:
| QUESTION | FACTS |
| How will the Google-Yahoo! agreement affect ad prices? | Neither Google nor Yahoo! set ad prices. Prices are set by a competitive auction. And because of the wide variety of keywords and ads it is impossible for anyone to predict with certainty what might happen to prices for individual queries or even across the board. Furthermore, ad price is only one part of the story. A more important measure for advertisers large and small is the return on investment of their advertising dollar. The Google-Yahoo! agreement will help advertisers convert more clicks into customers by showing more relevant ads on Yahoo!, giving advertisers a better return for every dollar they invest. |
| Yahoo! claims they will make hundreds of millions of dollars from this deal. Where does that money come from? | Yahoo! is likely to earn more revenue by being able to offer more and better ads. The deal will let Yahoo! show more ads on pages where it previously showed no ads or only a few ads. And Google’s technology will improve the quality and relevance of those ads, meaning more clicks from users visiting advertisers’ sites. Of course, advertisers are ultimately in control of how much they spend because they won’t pay more than what an ad is worth to them. |
| How does Google's quality score affect ad prices? | A quality score helps ensure that users see the most relevant ads not just the most expensive. All the major search engines, including Yahoo! and Microsoft, assign quality scores. A quality score is a formula that reflects what ads consumers prefer based on how they respond to the ads. By including quality scores in our advertising system, smaller companies can more effectively compete with larger businesses by creating highly relevant ads and websites. |
| Can Yahoo! pick individual ads to show based on who has the highest price? | No. Under the terms of our agreement Yahoo! won't be able to see the current auction prices for Google ads, and Google won't be able to see Yahoo!'s prices. |
| Can Google and Yahoo! use minimum bids to set a unified price floor for ads? | No. Google and Yahoo! will continue to set minimum bids in their auctions independently. Minimum bids help deter low-quality spam ads and help advertisers know what they need to bid in order to have a realistic hope of having their ads shown. Google has never based minimums on what competitors are doing and this agreement won't change our approach to minimum bids in any way. |
| A recent study claimed that ad prices would rise after this agreement is implemented. Is that true? | The study, by SearchIgnite, makes several flawed assumptions and uses questionable methodology, drawing its conclusions into question. First, the report fails to acknowledge that ad prices are not set by Yahoo! or Google, but by advertisers themselves, through the auction process. The report also mistakenly claims that for any given keyword, Yahoo! will have the ability to see whose ads are priced higher – Yahoo!'s or Google's - and then decide which ads to serve. Finally, the report mistakenly assumes that Yahoo! will serve Google ads for as many of its search queries as possible, contradicting Yahoo!'s own statements to the contrary. |
Competition |
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| QUESTION | FACTS |
| How will this agreement affect competition? | This agreement - unlike Microsoft's proposed acquisition of Yahoo! - means that Yahoo! will remain an independent company in the business of search and advertising. Yahoo! has stated that it will reinvest the additional revenue from this agreement into improving its user services and competing vigorously against Google, Microsoft and other companies. This is similar to other standard business practices where competitors share components. For example, Canon provides laser printer engines to HP, even though they compete against each other. In addition, the agreement is non-exclusive, meaning Yahoo! could make a similar deal with another company. |
| There is a claim that Google and Yahoo! will control 90% of search advertising revenue. Is this true? | No. This agreement is not a merger. This is about expanding the pie, not dividing it differently. Yahoo! will continue to run its own search engine and advertising system. Yahoo! will benefit from Google’s ad-placement technology, while maintaining control over how much and what inventory they make available to Google. Yahoo! will invest the resulting additional revenue in remaining a viable competitor in search advertising. |
| Will Google benefit from access to Yahoo!'s user data? | No. We have taken steps in the Yahoo! agreement to make sure that neither company has access to personally identifiable user information from the other company. |
Impact on Yahoo |
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| QUESTION | FACTS |
| Over time, will Yahoo! just outsource more and more of its ads to Google and cease to exist as an independent ad platform? | Yahoo! has made clear that it will still use its own system to serve ads, and it will use extra revenue from this deal to improve its ad platform. The arrangement covers only the U.S. and Canada, and excludes the fast-growing mobile segment. Yahoo! also has an economic incentive to keep serving as many of its own ads as possible, since it gets to keep all of the revenue from those ads, while receiving only part of the revenue from ads served by Google. |
| Once the deal is implemented, why would advertisers keep advertising on Yahoo!? | Yahoo! will make its own independent decisions about when to use Google ads. Yahoo! has said that it plans to show those ads primarily on pages where few or no ads currently appear. The only way for an advertiser to guarantee placement for its ads on Yahoo! is to advertise through the Yahoo! platform itself. |
Regulatory Review |
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| QUESTION | FACTS |
| Why are regulators investigating the deal? | Even though the companies were not required to receive regulatory approval of the arrangement before implementing it, Google and Yahoo! voluntarily agreed to delay implementation to give the U.S. Department of Justice and other regulators time to review the arrangement. Ultimately we believe that the efficiencies of this agreement will help preserve and enhance competition. |
| What are advertisers saying about the deal? | Some advertisers have been supportive while others have voiced concerns and questions. We recognize that we could have done a better job of explaining how this deal will work. That said, a number of advertisers, advertising agencies, and publishers have welcomed the deal. For example, Geoff Atkinson of Overstock.com said, "The agreement between Yahoo and Google should help the relevancy of our advertising on Yahoo, which should actually make the dollars we spend more efficient." |