cameron peron

Lot’s going on about the deal between Yahoo! and Google.  Google even setup a page about it. The deal is definitely bad for consumers… something like  Costco or WalMart annihilating every nearly every grocery store, including your very own local spot.  Only in this case it’s on a massive scale where the distribution of media, content and the ads you interact with everyday are essentially only a few steps away from being controlled by just 1 large player.

In this agreement, a portion of Yahoo!’s search and content inventory will actually serve Google sponsored ads in addition to Yahoo!’s. The situation gets gets even worse on a corporate level:

1. Google is coming close to “evil empire” status. I’ve written about the possible consequences of Google becoming that “one guy” we’ve all seen taking home leftovers from the all you can eat Chinese buffet.  I’m sure it’s lonely on top.  But rather than focusing on what makes them great in the eyes of the world – like enhancing a few key products and innovating killer new ones – they’re stalking out competitors in a take all or nothing approach, with the capacity to destabilize the internet.
2. Ruins margins for publishers. Totally out of Econ 101: Google’s massive inventory of traffic and ad distribution via publishers gives them too much power in controlling prices.  Everyone knows that Google takes a much larger commission of ad revenue from publishers hosting AdSense ads than affiliate networks performing the same service.  No doubt Google can get away with this and still compete against performance based networks given their superior optimization technology, bidding system and reach.  It’s an explosive combination for any single entity to take an even larger portion of search traffic which strengthens their control over pricing.  The results will certainly put publishers in a more vulnerable and reactive position in addition for possible regulation calls.
3. Another strong blow for Yahoo as a player. A possible deal between Yahoo! and Microsoft had the chance to maintain a competitive landscape in high volume search potrals as well as the internet as a whole.  With dismal results and the subsequent board room drama that still ensues – Yahoo! is only a shadow of player it used to be in terms of validating a much needed higher value share price on paper.  This deal not only downgrades their position, but literally sells their inventory/client base to their biggest competitor.  Where are they going to be in another 12 months?  Who else can step up to the plate and maintain a competitive online media environment?

The Yahoo! Google deal is just another another desperate and cheap attempt by Yahoo! to raise stock value in hopes of landing some magic deal.  Time will tell if this is their first step in becoming a giant Google Adsense publisher.

Controlling every point of our online experience without focusing a few critical elements can transform Google’s position as a cool company in San Francisco into a Costco style provider that we reluctantly accept due to its convenience and commoditization.

What do you think about when you hear the word Google? Entry point to the web. Creativity, innovation and serious $$. Maybe even people buzzing around in a really cool work environment.

I tend to think about a group of guys hell bent on breaking the rules and proving that the American dream still exists for anyone who has a great idea, a clever approach, determination and the skill to make it happen.

Today Google wants to be everything and everywhere online. They started with a search engine. Now they’re a toolbar, email client, GPS/mapping system, a scheduling solution, web-browser… and almost mobile phone amongst other things.

What made them cool was the search engine.

What made them that $$ was their ability to scale and target traffic.

What made them warm and fuzzy was their near Che Guvera revolution approach of going to head to head with the likes of Microsoft and other large companies. I love Google products like Gmail, their RSS feeder, calendar and even media tools like GoogleInsight which we’ve written about before. They’re far superior to other conventional services – especially one you have to pay for – like from Microsoft. Not to mention I feel like I’ve taken something back when I use them.

But seriously… can’t it go too far? Who wants a one stop shop for life? Do you want only your favorite cereal for breakfast every single day? Do you really want the Costco/WalMart experience applied to the internet? It can happen. And it starts by competing against people who not only do a better job but also provide strategic value to one’s business. Most recently it’s happened here:

The Google web-browser. Sure it’s good – but I’m willingly to bet it’s not make a ding in hard core Internet Explores user market. Most likely it will take a larger portion of Firefox, Opera and other browsers.

Google phone. What… iphone 2? I can appreciate that it’s a great entry point to mobile media. But why not focus on creating WAP based client or downloadable applications on a huge variety of phone modes so everyone can access mobile content in a form their already familiar with?

Google’s stands in a position to fit its brand somewhere between that warm fuzzy feeling you might get when walking into a small time local coffee shop and that somewhat sold-out feeling when ordering a coffee you can’t pronounce form Starbucks.

Obviously it’s their creativity that got them started. This same creativity combined with the shear scalability they control could be transform them into one of the same large companies they’ve grown accustomed to taking down in the first place.

So what does the Google/Publicis deal mean for offline media?  The deal could make Publicis one of the biggest innovators in bridging the disconnection between offline and online media.  Imagine a media company that size seamlessly leveraging their core client and creative assets in a new distribution channel.  Of course it could be one of the worst attempts for a traditional media company to reinvent themselves as an online player. :)

Lips sealed.  No one seems to know the valuation of the deal was, since Google finalized the sale on Sept. 10.  This already raises a few eyebrows as to Publicis’s real confidence in the purchase.  Measuring the investment of their newly acquired SEO rich affiliate network – as means to beef up their online marketing activities and presence is still very much an internal issue.

Offline media and performance marketing don’t mix.  It’s understandable that offline agencies from big to small don’t mess with performance marketing – it’s simply not their business.  The giants on Madison Ave. know how to negotiate enormous budgets and build brand campaigns.  Meanwhile, CPA and CPC pricing models are driving traditional impression based CPM models down on the aggregate… primarily from the explosive growth in traffic sourced from search engines and content rich publishers.  Despite this, there is always going to be a demand for brand driven advertisers who measure the effectiveness of their marketing campaigns against massive scales of revenue.

If it’s about branding, then Publicis’s bet may actually pay off. As we all ready know, the real purchase value of Performics comes from it’s advantage in SEO.  This asset combined with their already active search marketing activities – could be extremely lucrative combination for large brand oriented clients.  If you want to look at  a real risk in offline media take a look at CBS.  In their attempt to buy Internet in the last few months, they gambled on huge properties like CNET for $1.8 billion and LastFM for $280 million among others.  Time will tell if and how it will pay off.

At best it will redefine the industry. If the results are good, than large and small advertisers might soon follow.  Better still, this deal stands to legitimize SEO’s shady background by powerful market and economic forces in mass… making SEO and search marketing just another department in both large and small agencies.

To make it happen Publicis and other traditional media companies might consider following the likes of other bold moves and mistakes of acquisitions past.  Seriously.  Look at Yahoo! exodus of executives since the Microsoft deal went down, or is still going through… or whatever status it remains at.   Lack of top level competence from Publicis as well as a growing pains in corporate culture and job security can easily cause key management players an even entire company divisions to walk.

The ability of traditional media to make a successful bid with online media – lies not just in making wise acquisitions but in their management and optimization of a channel they are just beginning to understand.

Google is focused on performance marketing more than ever before. Since Google finalized the sale of Performics to Publicis earlier in August, the focus of the deal has been on the conflict of interest narrowly avoided from its previous acquisition of DoubleClick. Google is the world’s biggest provider of search and its revenue model is built from ad placement within its search engine and publishers using AdSense. 

Let’s look at foundation. Google’s $3.1B acquisition of DoubleClick in March 2008 expanded its reach dramatically via display advertising and affiliate marketing. The affiliate marketing portion of this deal included capitalizing on the advertiser and publisher base of Performics, a division of DoubleClick.

The most interesting part of March’s deal is that Google effectively jumped into performance marketing overnight – with serious potential to take a huge portion of the affiliate marketing industry. Their newly converted Performics affiliate network stood to “compete” against some of the best known names in the affiliate marketing including AOL’s TradeDoubler, Commission Junction and Linkshare. Actually competing isn’t really the right word – maybe obliterating is. With enormous inventory in search and display ads combined with significant reach via search and targeted publisher traffic – they immediately took action by offering AdWords advertisers a bid on pay-per-action beta tool. Now, advertisers could pay for a lead, sale or other action – rather than just a click. The program gave current Google advertisers an additional competitive advertising stream, while leveraging former Performics advertisers via Google’s targeted publisher base.

The results have been somewhat inconclusive. Little publicity or reporting was done outside of the service’s introduction. The program’s pay-per-action beta was active for a sometime before being merged into CPA bidding tool which Google released prior to the deal (in September 2007) . It was a bold move, but not enough to make a serious threat to other affiliate networks. Sure it takes time to make the transition and we won’t know what bottom line revenue was generated until Google’s annual report will be published next year. Nonetheless performance advertising hasn’t taken the Google’s spotlight.

What really happened in August & September? Details of September’s acquisition show that the SEO portion of Performics was center to Publicis’s interest and eventual acquisition. Selling off the SEO division wasn’t must of a surprise as SEO marketing tactics compete against other channels already operated by Google.

So what does Publicis’s acquisition mean for Google’s stake on performance marketing? With the ‘SEO issue’ conflict of interest out of the way – Google stands to finally spearhead performance based marketing – mainly affiliate networks. Most likely Google’s affiliate marketing services, website names and features will change to reflect the results of the deal.  But over time, the same services and pricing models will be slowly enhanced and integrated into a more powerful Google Affiliate Network. We know now that it’s not as easy as turning on a switch. However, the knowledge, publisher base and advertisers from Performics combined with Google’s extensive reach via search and publisher websites – could be the right combination to redefine performance marketing, control yet another online revenue stream and generate serious revenue.

Oui oui… Le performics acquisition :)

Mitigating a conflict of interest within Google’s acquisition of DoubleClick is just one result of this month’s finalization of the sale of Perfomics to Publicis. This week we’re going to take a deeper look into this deal and its effect on Google’s stake on performance marketing, offline media’s slow and stubborn move into online channels and the immediate benefits emerging markets may stand to gain.