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Jay Currie

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3/01/2005

Competition in Adwords

It seems that Google Adsense - which you can see to your right - is going to have some fairly hefty competition. Yahoo is testing a "long tail" ad scheme.

This is interesting purely in the sense that it is going to tend to force Google into a more transparent system. At the moment, Google's terms of service prevent publishers from disclosing pretty much anything about the program. (They may even purport to prevent a publisher from disclosing what he is not permitted to disclose.)

There is no due process here...As a company Google can choose to do business with whomever it wants and on whatever terms it wants. But Google, to this point, has pretty much owned the small publisher end of the pay per click ad business. So its decisions, shareouts, and time to pay were not subject to any competition.

It will be really interesting to see if Yahoo has learned much from this Google model. There are more than a few publishers who would love to have the option to switch.

What would Yahoo need to do?

Offer Paypal and other fast transfers of funds along with regular cheques. This is, afterall, the internet age.

Make the publisher shareout transparent.

Recognize that despite the groovy technology involved in placing context sensitive advertising on webpages the actual role of a search engine is closer to an advertising agency than an actual publisher. Typically (except of course if you are a Liberal friendly ad agency in Quebec) an agency will charge 15-20% of the ad buy. This compares rather unfavourably with the current 60-80% it appears Google is charging.

Reward quality publishers. While there will be an army of sales people out trying to get adsense advertisers to switch to Yahoo, the real stuggle will likely be for the tens of thousands of small to very small publishers who actually make the adsense model work.

Publish the bids for particular key words in an easy access format. Yahoo's company, Overture, already does this to a degree giving somewhat accurate prices and statistics for keywords you type in. But why not be as close to entirely transparent as possible? the more information publishers have about the value and traffic attractiveness of particular keywords, the more keenly they will compete to build sites which attract valuable traffic.

Choice brings change and there is no question that the keyword/adsense/adwords market could use a little competitive instability.