In the near term, unless a mobile ad tech story catches Mayer’s fancy, it seems “partnering” will be her avenue of choice for ad tech. Having spent a good part of her business life at one of the biggest, game changing ad tech companies ever, Mayer’s partner may be a fait accompli (for example).
But, let’s take a look…
To begin, let’s consider Yahoo display advertising tonnage. The aging Right Media Exchange (RMX) technology that currently monetizes Yahoo desktop display O&O and allows second-tier ad networks to trade second-tier demand/supply does not appear to provide a long-term future for Yahoo.
It’s not a coincidence that Annenberg’s transparency report in February, fueled by Google data, showed that Yahoo’s Right Media Exchange was a leading “ad network” for placing ads on sites with pirated content (PDF). Google wants to show that fact – and Google wants transparency because it thinks it can win the transparency game. Ironically, Google took the hit from Annenberg the month prior on its own data. See that article.
From here, it would appear possible that RMX will be supplanted in the next year or two by either Google or maybe AppNexus as it relates to desktop display ad infrastructure. A compelling mobile ad tech partnership on the other hand could be supplied by Facebook given their own breakneck pace of innovation and aggregated demand. Or is there another mobile ad tech startup in the house?
Certainly for desktop display, Yahoo search partner Microsoft will be pushing for the anti-Google solution of its “investee” AppNexus. But unless real-time ad platform/ad exchange AppNexus can do a full court press on why it’s better than Google – “we’re not Google” may be their strongest, differentiating argument with Yahoo – it’s Google for the win here, too, if for no other reason than former Googlers Mayer and COO Henrique DeCastro are not Google haters like previous Yahoo execs such as Jerry Yang. They’re Google lovers. (Microsoft eyes must have looked like a casino’s penny slot machines on “AARP night” when Mayer and DeCastro rolled aboard.) And Yahoo’s execs need to max out the yield for desktop display revenue in the next couple years before they get to “the mobile plan.”
If Google gets the Yahoo owned & operated display inventory from RMX along with the right to pick through the second-tier scraps (and other “tiers” Mayer is willing to deal), Federal regulators and media types are likely to get their “pantalons” in a bunch because of anti-trust concerns. But Yahoo revenues will likely continue to slide in the near term as it transitions to a mobile future. (A turnaround may be five to seven years away, at best. Take a look at how long it has taken former Googler Tim Armstrong and team to turn the Aol ship around.) To inquiring eyes, a Google deal for desktop display will ultimately look like a lifeline to the current Yahoo and the many jobs it supports. Mayer and DeCastro also have a couple of years of cobwebs to clean in Sunnyvale, and the recent mobile acquisitions will likely be shielded from the detritus of old strategies and guards, and serve as an incubator for a new Yahoo. Plan/build first – then revenue.
Wherefore Art Thou, Microsoft
Meanwhile, Microsoft is in transition when it comes to ad technology. Sure, Bing search ads work, but its failure to bring Yahoo a compelling search ads option has been fairly damning (hard to say who’s at fault here – Yahoo, Microsoft, both). Microsoft does have a huge and compelling source of display inventory connected to email address accounts across its owned and operated properties like MSN, Hotmail and Outlook.com. It’s just as well that the Atlas ad serving system is no longer in-house – no need to look at that as an ad tech strategy. They might as well try to help Google-competitor Facebook with its mobile plans.
In the ad tech ecosystem, Microsoft is clearly a publisher and ad network owner – with ad tech interests. They have a minority interest in AppNexus. Though it may sound like Microsoft hands were in Facebook’s Graph Search, Facebook is the one in charge here. Microsoft, again, is a minority investor in Facebook. And, no wonder it’s “investor only” given the apparent self-realization about failed acquisitions of the past (from tiny AdECN to enormous Aquantive). Perhaps the firewall around Skype is an example of how Microsoft can implement an acquisition? But is that one really a cash cow? It’s more of an “at least Google didn’t get it.”
Microsoft’s Steve Ballmer is ultimately very interested in taking down his arch rival – the GOOG. Likewise, the GOOG wants to stick it to Redmond. Today, it’s advantage to Google as it relates to ads and ad tech. Still, Microsoft has TONS of cash – and tons of cash to generate in the future – which it can use to influence companies and governments. Google is doing and will do the same. There’s room for a third to come up and take the prize while the battle rages (Could be Facebook or Apple, we’ll see), but Google is putting real solutions in place internally for desktop – and mobile, too. Microsoft can’t.
Mobile (whatever that is) could blow it all up. Who can monetize it first, effectively?
OK. End rant.