SEMs crave more search ad competition, eye MS-Yahoo

If Microsoft acquires Yahoo, the search engine ad market could gain a viable and sorely needed competitor to Google, but only if the post-merger integration is done with speed and precision.

That's the opinion of several search engine marketing (SEM) firms with experience helping clients design and manage campaigns on the Google, Yahoo and Microsoft search ad platforms.

As things stand now, Google has an overwhelming dominance of this market thanks to the massive popularity of its search engine, which gives its ads a wider and deeper distribution reach that dwarfs that of Microsoft and Yahoo.

Inevitably, most search ad budgets are devoted to Google campaigns, but advertisers would benefit from a more balanced competitive environment in which an alternative ad platform isn't discarded as an option purely on the basis of its limited reach, those interviewed said.

"We feel that a successful acquisition and integration of their [Microsoft's and Yahoo's] offerings offers the potential of forming a credible competitor to Google," said Noah Elkin, vice president of corporate strategy for digital marketing firm Steak Media.

This is important, especially now that Yahoo may outsource its search advertising business to Google. "The dominance of any one company in a given area is not good for the industry. We believe that competition is key to delivering value to advertisers," Elkin wrote via e-mail.

Search advertising is the largest segment of the overall online ad market, accounting for about 40 percent of spending in the U.S. last year, according to IDC. Google nabbed almost 80 percent of the about US$10.2 billion spent in search ads in the U.S. in 2007, followed by Yahoo with about 12 percent and Microsoft with 6 percent, according to IDC.

Anna Sebestyen, a freelance search marketer, works primarily with small and medium-size clients whose search ad budgets are smaller than those of large companies, so the opportunity to give Yahoo and Microsoft a shot at clients' campaigns is more limited.

"I give a chance to MSN and Yahoo whenever I can to see the specific reaction in a certain campaign, but my tests so far have shown that my clients' money is better spent, ROI is higher -- with the limited budget they have -- on Google, currently," she said via e-mail.

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