AOL, Yahoo, MS Cling to Each Other in Rough Display Ad Seas

AOL, Microsoft and Yahoo are joining forces to sell unused online ads to each other, a position designed to combat the growing market dominance of Google and Facebook.

The partnership will allow the companies to buy and sell each other’s online inventory of ads. The companies are interested in upping demand by ensuring advertisers that their product will be seen by the targeted demographic — if not in their own space, then on a different platform.

Each member of the online trio has lost significant ground to Google and Facebook every year since 2008. AOL has taken the biggest fall, dropping from a 7.6 percent market share of online display ad sales in 2008 to 4.2 percent, according to eMarketer. In the same time, Google jumped from 2.4 percent to 9.3 percent, boosted by the 2008 purchase of DoubleClick’s ad service for US$3.2 billion.

And no one touches Facebook — the social network had just a 2.8 percent share of online ad sales in 2008 and now holds 16.3 percent. Besides being one of the world’s most popular websites, it’s attractive because of the wealth of information it has about its users. Ads can be targeted to specific demographics and based on users interests.

AOL, Microsoft and Yahoo are hoping that as an alliance, they can win back some of that market. The companies said the ad operations will be nonexclusive agreements and the decisions, controls and exchanges will be kept independent, which should ward off antitrust concerns.

Microsoft, Yahoo and Microsoft did not respond to the E-Commerce Times’ requests for further comment.

Changing Ad Space

A growing amount of information about Internet users is becoming accessible to advertisers, including personal details from a social network profiles and commerce information, such as where users are spending money online. An advertiser can now be told whether a user is dieting, planning a wedding or interested in fantasy football. Those advertisers want to make their ads more efficient by targeting the right users.

“Advertisers are increasingly embracing more sophisticated forms of advertising at competitive rates. More than ever, advertisers are looking for a return on investment, exposure and better targeting options,” Michael Stanet, research executive at sismarketresearch, told the E-Commerce Times.

Google and Facebook have been successful at adapting to that type of performance-based advertising, whereas AOL and Yahoo have had a harder time getting away from the more traditional impression-based model.

“Throwing digital spaghetti at the wall and seeing what’ll stick is on the way out. Display ad models accepting that reality are doing quite well,” John du Pre Gauntt, analyst at GigaOM Pro, told the E-Commerce Times.

Too Small to Succeed?

It remains to be seen whether this is the partnership that can knock off some of Facebook and Google’s market share. With Microsoft stagnant, Yahoo navigating through a transition period and AOL losing ground, the three realize that alone no one is in a position to take the ad lead.

“As the companies are partnering instead of going at it alone, this new partnership network is likely a response to competitive pressures facing media and tech companies. By teaming up, the companies believe they can provide benefits where they may not be capable of doing individually,” said Stanat.

Even together, though, it could take quite an effort to undo the work that Google and Facebook have done over the past few years, especially as the two companies have proven they have the ability to be ahead of a curve that is still evolving.

“From a scale point of view, I’m hard pressed to imagine a cobbled-together alliance will overpower two 800-pound gorillas, let alone either one of them,” said Guantt.

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