We wrote about the proposed Google/Yahoo search deal a month ago. While most of the hand-wringing in the media and blogosphere was by investors worrying that Yahoo had rung its own death knell, advertisers and publishers were left scratching their heads, wondering what this meant for them.

A study by SearchIgnite takes a look at the search advertising market under a Google-Yahoo deal. The study demonstrates Yahoo already outperforms Google on branded and popular keywords for the first 3 search results, while Google registers higher CPCs for long-tail keywords and those ranking below the 3rd position. The current deal will help extract value for the latter for Yahoo, to the tune of an average lift of 22% in ad costs to advertisers, assuming Yahoo optimizes its ad delivery to maximize revenue.

Assuming rising Yahoo search rates will offload some spend from search to the publisher network, as advertisers try to strike a new pay/performance equilibrium, RPCs would probably increase for publishers in the Yahoo Publisher Network as well. However, advertisers are unlikely to be happy, and a recent intimation of the Google-Yahoo deal reducing competition in this space by Yahoo CEO Jerry Yang will do very little to assuage the DoJ and others (the European Commission, state attorneys general, etc) in charge of preventing anticompetitive corporate deals that this deal is something they can live with.

This entry was posted on Wednesday, July 16th, 2008 at 12:45 pm and is filed under Online Advertising. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.