It's not just Microsoft (Nasdaq: MSFT ) voicing its displeasure of the potential marketing hookup between Yahoo! (Nasdaq: YHOO ) Google (Nasdaq: GOOG ) . The affected sponsors are now chiming in: The Association of National Advertisers, a trade group that represents many of the marketing world's biggest sponsors, is objecting to the partnership in a letter to the Justice Department last week.
Yahoo! is counting on outsourcing its paid search page views, in part, to Google. The deal would generate as much as $450 million in incremental operating cash flow. A good chunk of those realized savings would come from Yahoo!'s ability to shave its overhead by outsourcing the interactive marketing, but it's undeniable that the bigger draw is that Google would be able to milk more out Yahoo!'s pages than Yahoo! itself.
In other words, it would costs advertisers more to reach customers through Yahoo! if Google is the one running the show.
Two sides of Mr. Softy
It's easy to see why advertisers would be upset. It's real money out of their pockets if Yahoo! can generate more money off its pages. It's in the trade group's best interest to keep Yahoo! slow.
What is harder to fathom is why Microsoft hasn't jumped all over this as a selling point. If it gets more expensive to advertise on Yahoo!, this would actually benefit Microsoft. It can either attract new marketing partners as a low-cost alternative or simply bump up its rates to remain competitive.
Instead of cheering on the possibility of being the new top alternative to paid search buys through Google, Microsoft appears to want Yahoo! to go it alone. If it can't have it, no one can!
It's a selfish position to take. It's also not too bright. The moment that Yahoo! begins dismantling its paid search team, Microsoft can begin picking out key hires to beef up its own platform.
Microsoft has never gone full monty here. When Google launched its AdSense program for third party publishers of all sizes, Yahoo! followed suit with YPN. Microsoft stayed behind. It chose to simply strike stand-alone deals with big publishers like Facebook and Digg.
It was a mistake, in retrospect. The Internet is now plastered with "Ads by Google" on sites big and small. The third party sites encourage advertisers to approach Google to reach that wide audience.
There's nothing wrong with sites like MySpace and Digg, but social networking and social news sites aren't ripe with lead generators. Google knows this. It serves up ads through News Corp.'s (NYSE: NWS ) MySpace. It also owns Orkut and a stake in Bebo parent Time Warner (NYSE: TWX ) .
If Yahoo! is allowed to turn to Google in the same way as MySpace, CNN, and AOL have, Microsoft needs to make the most of the opportunities than the threats.
It should ad up
Regulators will have an interesting decision to make. Yes, Google has become too big, but how can it justify allowing anyone but Yahoo! the right to milk more money out of page views by outsourcing to Google? Monetization denied would be one more shot at Yahoo!'s beleaguered shareholders.
Microsoft's best attack strategy is to arm itself with high volume online marketing providers like ValueClick (Nasdaq: VCLK ) and Marchex (Nasdaq: MCHX ) as it refashions itself as a poor marketer's Google. It's not where Microsoft wanted to be, but it's better than positioning itself as a poor marketer's Yahoo!.
Step up to the silver medal podium and like it, Microsoft.
Incensed sponsors? Have you met the new silver medalist?
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