Battle of the Advertising Superpowers: Who’s Got What?

It’s been a crazy couple of months. Not only did my employer agree to be acquired by Yahoo!, but our competitive landscape has changed dramatically with Google acquiring Doubleclick, Microsoft acquiring aQuantive, WPP acquiring 24/7 RealMedia and AOL acquiring AdTech AG to go along with what they already own in Advertising.com.

Additionally, there are still some other large players who are also in the game such as News Corp./Myspace/Strategic Data Corp, and IAC/Ask.com.

Obviously this is a big land grab for these large companies, combined with trying to get innovative companies who are pushing things forward in online advertising. The Wall St. Journal talks about the ad exchange concept and how it relates to these acquisitions.

The media and blogs have been covering these stories quite a bit, but I’ve seen a lot of writers and commenters really not having a great gasp on what pieces of the advertising business each company has now, how they all stack up, and what it all means going forward. So, I’ll try and help out.

Who’s Got What?
After the acquisitions are all complete, we need to stack up all the areas that matter in the online advertising battle that’s taking shape. (A checkmark means they have an asset, the 1/2 means they do to some extent but not to the same level as the other companies).

Asset	Google	Yahoo!	MSFT	WPP	AOL	NewsCorp	IAC/Ask
Search Inventory
Search Ad Platform
Contextual Network
Display Ad Network
Ad Serving
Ad Exchange
Ad Agencies
Owns Own Content

Now that we have our handy chart, let’s break it down by asset.

Search Inventory
This refers to the company actually owning search engine ad inventory, which basically means do they have significant search results in which they can show ads against. Search inventory is generally very valuable to advertisers and generates good revenues for the company because users often have an intent to buy or act and the technology can match ads to their intent.

Google is the king here with over 60% of the market with Yahoo also having a nice chunk, then it tapers off with Microsoft and and IAC/Ask.com. We’ll give News Corp. a 1/2 because Myspace does have a search feature that creates a chunk of inventory that Google currently monetizes for them.

Search Ad Platform
Just having search inventory doesn’t mean you have a good advertiser platform to monetize that inventory. Google has Adwords, Yahoo has Yahoo Search Marketing (Panama), Microsoft has AdCenter, and Ask.com has their Sponsored Listings. We’ll give AOL a 1/2 because they have a white-labeled version of Adwords to buy their search inventory separately.

Contextual Ad Network
Now that we know who has strong search ad platforms, do they have a publisher network in which they can give their advertisers additional reach through placing contextual ads on publisher sites? Google leads the way here with Adsense being the strongest ad network. Yahoo! has the Yahoo Publisher Network which has played second fiddle to Adsense but has a strong publisher base. Microsoft has announced a beta of their publisher network, but as far as I know isn’t accepting invitations from it anywhere so it gets a half point. Ask.com rounds out the group with the announcement of their contextual program as well, although I haven’t seen this in action anywhere either so we’ll give them a half instead of a full check mark.

Display Ad Network
While contextual networks are great, they aren’t the only ad game in town as the display ad has continued to be the leader in high-dollar brand advertising, and has also made a strong run over the past few years in direct response. Ad exchanges, optimization, and increased use of data and technology has allowed the display ad to make a comeback. Although some would argue that it never left.

I was tempted to give Google a half mark on this one, as their display advertising efforts through Adsense haven’t set the world on fire, but their acquisition of Doubleclick makes it fairly obvious that this asset will exist fully in the arsenal. While Doubleclick isn’t an ad network today, it’s likely Google is going to integrate/leverage display capabilities to have a serious display network.

Yahoo! has such a vast amount of content and so many properties that they essentially are an ad network just on their own site. To add on though, in the agreed acquisition of Right Media they also add on a good sized network in Right Media’s Remix Network. Additionally, the Right Media Exchange has over 60 ad network clients, so the display ad network business is definitely a strong point for Yahoo! moving forward.

Microsoft is now a stronger player in the display ad network business by buying aQuantive which has a high-quality network in DrivePM. They also have started to act a bit like a network with representing Facebook’s inventory. WPP is a player with the acquisition of 24/7 Real Media which has a strong display ad network. AOL definitely gets a strong checkmark as the owners of one of the largest display ad networks in Advertising.com.

One could argue that News Corp has a display ad network of it’s own properties such as Myspace, FoxSports, Scout.com, AmericanIdol.com, etc. However, they’ll get credit for that in the “Owns own content” category. IAC/Ask is in a similar situation with the content properties they own, but neither are quite display ad networks (yet).

Ad Serving
Having networks is a primary driver of revenue due to the nice margins, but there is an extreme amount of power when you control the ad serving infrastructure of the web. It’s another example of how the online advertising wars are playing out on many fronts. It’s usually quite easy for publishers and advertisers to switch ad networks they work with, but there is usually a much deeper integration with your ad serving partner.

Google has long been rumored to be building their own ad server, but the Doubleclick acquisition gives them both advertiser and publisher ad serving. Yahoo! has had a strong internal ad server for a long time, and the acquisition of Right Media gives them an immediate ad server to offer to clients as well. Microsoft is now fully capable with the Atlas and Accipter ad serving platforms being part of their acquisition. Atlas is one of the leading advertiser and agency ad serving platforms, while Accipter is stronger in the publisher realm. WPP brought 24/7 Real Media’s Open Ad Stream ad serving platform into their war chest, which has a strong publisher base as well. AOL also purchased Ad Tech:AG, a German ad serving firm that will be part of their Advertising.com unit. One would have to think they have plans to roll this out and start pushing their own ad serving technology.

News Corp comes in with a half-check due to their acquisition of Strategic Data Corp. It’s not clear yet whether they wanted to just own that technology internally, or actually ever roll it out to any clients.

Ad Exchange
Perhaps my favorite piece of the puzzle! Right Media’s success combined with Doubleclick announcing their own soon-to-be exchange, and general buzz about exchanges everywhere leads me to believe it’s a key piece of the advertising wars. Why? Well, exchanges remove friction, connect partners, and provide a common trading platform in which all the players can benefit. Whoever can build the largest and most successful exchange will continue to attract buyers, sellers, and brokers of all shapes and sizes which will grow their advertising ecosystem. An exchange also can tie in to the other categories in this post such as ad networks, ad serving, and other technology.

Google gets a half-check because they have an exchange in the works with their acquisition of Doubleclick. It’s not a full check because it isn’t launched yet, and I’ve heard rumors from some that it could just be more like a big ad network. Without knowing all the details, it didn’t make sense to give them a full check yet. Yahoo! gets the only full checkmark in this category by acquiring Right Media. Right Media is a full-blown exchange, has been for over two years, and has over 20,000 companies buying and selling via the technology to the tune of over 120 billion ad impressions per month.

Ad Agencies
Ad agencies are important because they are essentially the controllers of the majority of brand advertising dollars spent on the web today. They choose the tools and platforms they want to work with, and those companies benefit and will continue to benefit in the future by getting more access to the ad spend from the agencies. While I don’t think it’s totally necessary in the advertising wars to actually own agencies as a couple of companies now do, but it is important to have your ad tools and platforms in heavy use by the agencies in order to get more access to the dollars.

Beyond having agencies buying from Adwords, Google now has their hooks more in the agency market from the DART For Advertisers product they control from the Doubleclick acquisition. DART for Advertisers is one of the most commonly used ad servers in the agency world. Yahoo! does have agencies buying through Panama, but currently has no tools being used by agencies beyond that.

Microsoft is now an agency powerhouse. Not only is the Atlas ad server an agency favorite, they also now own a significant share of the agency market from the aQuantive acquisition. It’ll be interesting to see how the agencies owned by Microsoft choose to work with the other major players in the space. WPP is a conglomerate of agencies, so it’s safe to say they’ve got this business covered. Will their agencies adopt Open Ad Stream as their ad server of choice?

Owns Own Content
One thing that I think is sometimes lost in all this is the power of the companies that own and control their own content. It puts you less in the position of relying in outside companies to actually have a place to serve your ads and provide advertisers value. It also allows you to test and develop using your own properties instead of having to put clients through it, and it can be leveraged in many other ways such as behavioral targeting.

I didn’t clearly define whether search results count or not as owning your own content. However, Google obviously leveraged this a great deal by getting advertisers to advertise on their search results that they then can also push out through their content network. Either way, Google qualifies for a full check since they’ve also continued to grow their services like Gmail and Google Calendar where they can show ads, but also in acquiring YouTube.

Yahoo! is the big daddy of owning your own content. The Yahoo! properties are vast and large and in almost every key vertical. As strong as Google is in search, Yahoo! holds a similar edge in content ownership. An example of the properties they own which usually fall right around the top of all web properties in each vertical: Yahoo! Mail, Yahoo! Finance, Yahoo! News, Yahoo! Sports, Yahoo! Search, Yahoo! Calendar, My Yahoo!, del.icio.us, Flickr, Yahoo! Answers, Yahoo! Video, etc.

Microsoft is also strong in the content game with MSN, Hotmail, MSN Search, etc. They aren’t quite up to Yahoo’s level but are a serious player. AOL is similar as well with all the AOL verticals and properties and definitely deserves a full check. News Corp is good as well with the behemoth known as MySpace, Fox News, Fox Sports, Scout.com, AmericanIdol.com, etc. Not to be left out, IAC is yet another strong content player with Ask.com, Ticketmaster.com, Match.com, CitySearch, CollegeHumor, and more.

Summary
Where does all this leave things in the battle for online advertising supremacy? Assuming all the acquisitions go through, there is the integration challenge for each company to go through, as well as prioritizing what they’re going to execute and how. Then they actually have to go execute on it. It’s impossible to call a winner at this point, but looking at the chart it’s clear to see that Google and Yahoo! are the best positioned to fight out the battle, with Microsoft also close enough to keep their name in the mix.

Looking at Google and Yahoo! specifically, they each have some strengths and weaknesses that will make it very interesting. Google has the advantage in search monetization, the Adsense network, and in ad serving. Yahoo! has strengths in their owned content, ad exchange, and display ad business. Which company can close the gaps on the other, and who will move forward with the right strategy over the next few years? Only time will tell, but you can bet it’s going to be fun to watch and participate in. I also wouldn’t count out the other players such as News Corp, AOL, etc. as they are all capable of making moves, and are each very successful in their current strong areas at this point. We also may see many deep partnerships come into play instead of having each company trying to own their own asset. Let the fun continue.