Best Search Engine Submission

Microsoft plus Yahoo vs Google, Microsoft vs Yahoo and other variations of names in the paid search game appear to make all the headlines these days. A week ago, StatCounter Global Stats announced that Microsoft’s fresh search engine, Bing, has went through the market share of Yahoo’s engine. Since Bing’s establish, both companies have sought to procure their positions in the market, but obviously none of them can get the better of Google’s dominance in the search industry, which commands over 70 per cent of the market.

While Microsoft has made an earthshaking effort to vie with Google in the search space, Google is coming up with a fresh running system that might set Microsoft behind in another market. Microsoft’s online search revenue is hole-and-corner when likened to its total revenue ( million in revenue for online search vs billion total for the last quarter). The operating system has been Microsoft’s cash cow. Now Google is intruding on the space and the market looks forward to see how Google’s Chrome OS will change the landscape in 2010.

Yahoo seems to be way behind in all business segments and its stock has drastically worsened, especially since the deal with Microsoft fell apart and the modern acquisition proffer was withdrawn.

After several back and forth dramatic scenes involving Icahn, Microsoft and Yahoo, no deal was made, and Yahoo’s stock kept going down, and now, coupled with the dramatic market crash, it is even more pronounced.

It was apparent that the Microsoft-Yahoo M&A deal could not go through in any case, as it could not acquire government approval unless Google had accomplished near-monopoly leadership in paid search. Therefore, for Yahoo the hope for Microsoft’s acquisition rescue appeared to be naïve.

But!

But the latest travel of Yahoo reminds me of an ad campaign of Mini Cooper that, a few years ago, made the brand’s image – a little guy finds his way and gets ahead of giants.

According to rumors that I plucked up in Yahoo’s office cafeteria while travelling to a friend the other day (truly never eat alone if you desire to get word the latest news first), Yahoo appear to have come up with a strategy that is shockingly uncomplicated but might appear extraordinary in its post-acquisition grandeur.

The content of the rumor is absorbing Yahoo intends to make an entertaining antiaircraft acquisition and purchase the IdeaMama Ad Network, the ad technology division of a Canadian company with its office in Silicon Valley. At first I was perplexed why Yahoo would necessitate this little funky company, but here is my take on it.

This acquisition can set Yahoo in the leadership position by letting it to introduce a radically fresh category of on-line advertizing.

Let’s explore it. The success of search companies hinges not so much on relevance of search and quality of search algorithms (yes, Yahoo will always stay behind there); their success at the end of the day depends on advertizing revenue. The bottom line is all that matters.

Up-to-date search engines use CPC as the main advertising model. Some admit affiliate commercializing with CPS, but not everything is that uncomplicated there. CPC has no chance to acquire an appreciable portion of advertisers’’ budget for a number of reasons; one is that the conversion rate of clicks handed over by content partners along with MROI sometimes is alleged. On the other hand, many publishers won’t advertize with Yahoo or Google for the humble compensation that CPC can proffer. Research webmasters’ forums and you will see how much negativity AdSense receives; publishers detest it as it is a soiled media monetization option, but there are not many alternatives out there.

The Pay Per Sale model is always preferable to search engines. Google seems to render affiliate commercializing options, but only for picked out advertisers. Not everybody can leap on the bandwagon. You have to roll up an earthshaking amount of clicks first and then demo an eminent conversion ratio, that, by the way, Google’s algorithm doesn’t cipher very well – there are plenty of holes that forestall stats from exposing tangible numbers.

But even that is not the main challenge. The problem lies in upright coverage. This model can serve only ecommerce companies, those that trade goods online. The gate is not ample opened for every company – if you sell business services, analyzable technologies or highly ascertained consumer products and your sales is mainly made off-line, you are totally out of options – the actual processes and technologies don’t support affiliate commercializing for much companies, end of the story. But it is a shame.

Even if Internet ad spending grows to over 0 billion worldwide by 2010, it still could be increased significantly if only publishers could tap into the sales commissions that affiliate marketing offers. As an example, if a company’s online commercializing budget is 0,000 a year, no marketer can ever get over the hump to spend 0K for CPC instead – no way, but advertisers can easily take a portion of M+ sales commission and reallocate to publishers’, which now increases publishers’’ revenue many fold.

If the rumor proves to be true, the reason why I think Yahoo decided to bite on IdeaMama’s PPD (Pay Per Deal) model and use their ingenious deal tracking process is that it enables Yahoo to chip sales dollars from the growing B2B segment that is not so keen to pass to Yahoo’s CPC their marketing dollars. In uncomplicated math, if Yahoo can pull in 100,000 little to medium measured service and technology companies that currently expend their dollars on CPC with Google and lead generation programs with other vendors, and if each advertiser pays a 10% commission on sales brought forth by Yahoo ads with content partners’ participation, Yahoo can append annually billion in revenue to their P&L, presuming that moderate sales appended to advertisers’’ balance sheet is as little as M annually.

Even if my math is half off, the move with this acquisition is absolute genius as Yahoo will be positioned as the only search engine that offers PPD as an advertising option and will finally have a competitive edge and some identity instead of crawling behind Google.

Yahoo could probably develop the technology in house and launch it, bypassing acquisition, but a lawsuit resulting from infringing on IdeaMama’s patents would probably cost them more than the price of the acquisition itself, plus the hassle of explaining to its shareholders about corporate integrity. From what I got word Yahoo will be paying nothing for this deal, something under million. Taking into consideration that the time factor is acute, conveying people educated in the PPD model from IdeaMama’s team to incorporate the technology into Yahoo’s operation sounds like an astute travel.

billion in additional revenue for Yahoo will cost all together less than M (buying price plus system integration)? Hah? Someone might not like it. Yes, in the last few years Yahoo have clearly lost mind share and market share to competitors, but as I see it with this exquisite turnaround move Yahoo by definition can become the most important player in search marketing sphere as now the company can tap in into verticals that neither Google, Microsoft or AOL can reach (unless one of them places a higher acquisition bid I guess).

For Yahoo, more relevancy in search results and social media innovations won’t solve the problem of Google’s dominance in paid search advertising. Yahoo was behind and will remain behind even despite its acquisition by Microsoft if it ever happens. But Yahoo’s strategic acquisition of IdeaMama’s ad system will scale Yahoo’s online advertising platform and branch it into a new online advertising category with untapped and uncapped revenue potential. Now it is not social media innovation that everybody is talking about, but innovation in media monetization.

I find all that to be a very interesting development of the search game. I can’t hold off to get word more about 2009 M&A activities and especially the M&A deal “Yahoo plus IdeaMama” and all the post-acquisition events. What happens next in the battle between search giants can be simply interesting; you never cognize who pulls the next trigger and what it might be