Google Search Network Partners – Biggest winners of MSFT/YHOO alliance?

February 19, 2010 at 5:23 am 2 comments

As the dust settles following the EC and DOJ approval of the alliance between MSFT and YHOO, much is being said about the larger implications related to search engine market share and the likely impact on Google, Microsoft and Yahoo.  What seems to have been overlooked is the potential impact on the earnings of America Online (NYSE: AOL) Infospace (Nasdaq: INSP) and even the smaller players like Vertro (Nasdaq: VTRO) and (Nasdaq: ANSW), all members of the “Google Search Network” that provide Adsense revenue that ranges from AOL’s $550 million on the high end to Vertro’s $30 million per year on the low end.

When MSFT begins its siege in earnest, it seems logical that an assault on Google’s Adsense network might be on tap. Not unlike Google’s launch of Google Doc’s which began a broadside attack on MSFT’s primary earnings engine, a strike on the largest revenue growth vehicle (Google Adsense revenue grew much faster than the rest of the company in Q4 2009) in the Google arsenal seems all but certain.  While MSFT obviously has the war chest to simply acquire strategic members of the Google Network, it seems even more likely that they would seek to lure all of them away with higher rev share agreements and/or minimum search revenue guarantees that will accomplish the dual goals of increasing MSFT’s search market share while striking at the heart of Google’s biggest revenue growth machine.  In either case, it would seem that those companies who are producing large revenues through their participation in the Google Search Network may be among the biggest winners of the new MSFT/YHOO war with Google as the bidding should certainly result in higher payouts and/or a generally higher value accruing to each company for any given search advertising revenue stream.


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2 Comments Add your own

  • 1. Stuart G  |  February 22, 2010 at 3:58 pm

    Microsoft cannot outbid Google for rev share deals without setting themselves up for heavy losses on each deal. It is widely understood among publishers that Google’s Adsense will monetize at a much higher level than MSFT or Yahoo. So it MSFT wants to offer AOL a 95% rev share, AOL might not be willing to take it without an additional guarantee of a minimum dollar amount to be paid that exceeds what they are already earning from Google. Not sure how that would be structured, but we know that earning 95% of the ads the MSFT ad network would run on your site might not earn as much $$$ as a 90% rev share from the ads that Google would run. For MSFT to make up that difference might require minimum payout deals that result in MSFT actually losing money on each click. While it would be a major blow to Google to lose the AOL’s and’s, it does not seem to be a sustainanble long term strategy.

    • 2. Pedro  |  October 29, 2010 at 2:21 am

      Google gained share by essentially paying a premium for high quality distribution to grow its network and win partners from Yahoo in the early days. They invested in their partner network, often paying more than 100% in the short-term. This serves to lift PPC and Google’s bottom line. With the best monetization model (distribution/technology) Google will keep the best partners, unless Microsoft is willing to invest. It would be a smart stratgey to get back on the growth path. And do something with all that cash!


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