There’s been numerous news reports about Google considering “buying” Yahoo!, or at least teaming up with private equity companies to do so.

While most of the articles at least mention in passing that it’d be unlikely for this to pass government review, I haven’t seen many people actually discuss why Google is involved.

Why wouldn’t a Google acquisition of Yahoo! pass government review? Well, if the Department of Justice wouldn’t pass the search deal that Google and Yahoo! worked up in 2008 where SOME of Yahoo!’s search results were powered by Google, then why would they actually let Google take part in buying all of Yahoo!?

In fact, many thought that Google knew in 2008 it wouldn’t pass government review, but tried to do the deal just so Yahoo! would turn down Microsoft and waste a lot of Yahoo!’s internal time (and it worked). I sat in many meetings at Yahoo! that were spent talking about the tests we were running with Google and how we were going to implement the deal.

There hasn’t been enough change in search market share for anyone to seriously even think it could pass. I’m not entirely sure if Google being only part of an ownership group with private equity firms would change the government’s view, but I doubt it.

Which leaves us asking, why is anyone even taking Google’s interest seriously?

I can’t answer why anyone is taking Google seriously, besides the fact that they are one of the only players who actually have the cash to do something around Yahoo!.

It just seems like any major involvement on there part is going to just raise big red flags with the governments of the world and will never pass “go”.

Why would Google get involved then?

I feel like there are two obvious answers to this one.

1. Google can pretend to at least have interest in Yahoo! to draw out how quickly something happens here. The more time Yahoo! is in limbo, and the more time Microsoft spends figuring out what to do about it, the better that is for Google to continue to separate itself from them.
2. Google can go as far as even floating prices out there to try and get others (Microsoft) to feel like they have to pay more in order to get Yahoo!. The more money someone spends on Yahoo!, the better that is for Google.

I suppose it is possible that Google really does want to keep Yahoo! out of Microsoft’s hands, but it seems like Microsoft having to acquire and digest Yahoo! would just allow Google to accelerate ahead even further ahead. It’s all just a ruse to waste time by complicating matters and drive up the price. Well played Google.

The tech media has been all over the rapid growth of Google’s social network Google Plus. Many have assumed that this rapid rise means that Google Plus is on it’s way to be a serious competitor Facebook and Twitter.

After my usage of Google Plus so far both sharing and reading, it’s definitely a solid product that does some things better and some things worse than other social tools.

However, I’ve yet to feel like it’s on it’s way to truly competing with Facebook or Twitter.

I think the graph above has been caused by the following:

• Familiarity with Social Networking - A larger number of people are now familiar with social networking than when Facebook and Twitter launched. They also have more friends and are more connected making it easier to hear about a new social network and decide to go try it out.
• A Desire For An Alternative - While Facebook and Twitter are massively used, there are a large number of users who don’t love them as products themselves and have the desire for an alternative. Google Plus is really the first serious alternative to launch.
• Google “Install” Base - So many people already have Google accounts and use Gmail, that it made it super easy to explose Google Plus to users as well as make it easy to intelligently recommend Gmail contacts to invite.

Will Google Plus Keep Growing?

Google Plus was reviewed well by the tech media, and it feels pretty good as a product. However, after a few weeks now I’ve got over a 100 people in my “circles” but the only activity I’m seeing is from about 5-10 people who all have jobs as part of the tech media.

There is literally NO activity from most of my normal friends, many of whom are on the cutting edge of technology and are heavy social network users.

Why is this? I’ve asked a few of them, and the answers tend to be that they don’t know why they should use Google Plus instead of Facebook or Twitter. Their friends aren’t fully there yet, they don’t really feel the need to organize them into circles, and Facebook and Twitter just do a good enough job.

Google’s going to need to do something to differentiate Google Plus even more from those competitors and do something SIGNIFICANTLY better than the competition in order to get people to spend more time there.

It’s definitely possible, but it’s a tough task that won’t be as easy as the initial spike of growth in the graph above.

Why is Google developing this technology?
Why is Google spending the $10+ million of shareholder money per year the project consumes (15 engineers, plus drivers, plus the cars).
Isn’t there something closer to its core business that Google could spend this money on?
Google Apps, for example. Google Apps are cool. But in many ways, they’re still not ready for prime time. Wouldn’t it maybe be better for shareholders if Google spent this money and focus on Apps instead of robot cars?
Or Chrome? Or Android? Or even search?

It should be noted that Blodget is not against the technology being developed at all, just against Google developing it as part of a project within their own walls. He goes on to argue that if Larry Page wants to tackle this problem, he should spin it out as a separate company and give those working on it equity stakes and make it a traditional startup. Jeff Bezos has done this with some of his interests at Amazon.com, and Google could be a major shareholder in such a startup.

Mike Arrington at Techcrunch takes the opposite approach and says that Google should do this because they can, and because Silicon Valley needs to take on tough problems:

I love the fact that Google is working on cars that drive themselves. I’m not a shareholder, but if I was I’d still love it. If Larry Page decides this is what he’s passionate about right now, Google definitely doesn’t want him starting some new company to pursue it.

Keep it at Google. If it doesn’t work, he’s scratched his itch. If it does, they can spin it off later. In the meantime, Google benefits because people know they’re working on new technology that can change the world, not just how to make more money from keyword ads. There are engineers that may take jobs at Google just knowing that they’re doing stuff like this that otherwise take jobs at one of those companies that Lyons is mocking just to get pre-IPO stock.

Both writers make some persuasive arguments, but to form my own opinion I put myself into the shoes of a large Google shareholder. How would I feel about this? I think as that large shareholder, I’d be concerned that Google really hasn’t found a huge revenue stream outside of Adwords and search. One option would be to optimize this or work on tangential projects like Blodget suggests. Another route is to go and try and build things like computers that can drive cars.

I fall along the line of thinking that if Google sticks too closely to their core competency, they never break out of being a one-trick pony. Therefore, as long as this project doesn’t consume massive amounts of revenue with no return ever in sight, I’d support it. Of course, it really is likely that this technology won’t generate any revenue for 5-10 years, if ever. There’s risk in that, but Google has a mountain of cash and is risking $15M a year on this worth it? It just might be if it changes the automotive landscape in the future, and allows people to spend an extra hour or more per day on the internet instead of watching where they are driving.

One other point that I think Blodget misses in his argument is that this project may have a much better chance of succeeding inside Google. I agree with him that Silicon Valley has proven that the startup is the best form of innovation. However, this project done as a startup would require significant financing for years before it makes any revenue, and because it’s being done by Google I’m sure it’s earning more respect and support from police, parts manufacturers, and others than if it were a startup nobody knew existed.

That all being said, it’s interesting to think it might be possible that I won’t need to teach my kids how to drive because a computerized car could do it for them. Wild.

New Google Phone Service Whispers Targeted Ads Directly Into Users’ Ears

There has been considerable speculation about why Google not only purchased Admob, but spent so much money in doing so. The obvious off the cuff answer is to get their hooks into the mobile display advertising space by acquiring the most well-known mobile ad network. Some people such as Niki Scevak don’t think that’s a particularly good idea, and others such as Silicon Alley Insider seemed to have to work a bit to justify it.

While Niki makes some decent points about mobile advertising being tied to mobile commerce, and mobile commerce not being a huge market yet, I think the question I’d ask here is how will mobile commerce NOT become huge over the next few years? Mobile phone usage is skyrocketing and innovations such as the iPhone, Droid, and phones and software yet to be developed are going to keep that pace of innovation and change going. While I’m probably an early adopter, I’ve conducted numerous ecommerce transactions through my iPhone and in fact bought a book for my iPhone Kindle App just today. While I didn’t see an ad for this book on my phone, why couldn’t I have seen one that drove me to the purchase?

Regardless, I don’t think the mobile ad network is Google’s sole motive, and perhaps not even it’s strongest motive for the acquisition. I think John Battelle and Ian Schafer nailed this one by pointing out that the key asset for Google is the DATA.

This is data that will obviously help for ad targeting and the like, but getting iPhone app data (and other types of data) will be immensely valuable as Google attempts to take on Apple to own the mobile phone (software) market. The mobile data nut is just being brought to the table and is just now people are beginning to think about cracking it. It’s also worth pointing out some past Right Media colleagues of mine (Greg Yardley and Jesse Rohland) started Pinch Media a while back to handle mobile application analytics. This will be an interesting space to watch moving forward as mobile continues to grow.

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.

Don’t get me wrong, I am an advocate of advertising on the web, but what I didn’t like was that I in the few minutes I spent trying to investigate this on my own machine I didn’t figure out how to turn it off. I primarily use Firefox anyway so I figured I wouldn’t have to deal with it anyway. However, I’ve noticed that even though Firefox thinks it’s my default browser (as I selected it should be) various other applications on my computer keep launching IE7 when they launch web pages.

While I think it’s okay for Google and Dell to work together on providing search results with some advertising, what they’re doing here is pretty offensive with the page above the fold being entirely ads and the difficulty of removing the behavior from your system.

First, I think we have to ask if we believe this is true. I’d guess that Google would not make such a move without being very confident that it was going to eventually lead to more revenue. As a public company, it’s even risky to hurt short term results in this manner, so I’m betting it doesn’t even hurt their short term revenue results that much.

Scoble then theorizes that the purpose of this is also related to their Pay-Per-Action program:

Anyway, Google is doing that to make way for its new “pay per action” advertising type (announced yesterday). This is brilliant. Advertisers are going to LOVE this. Imagine I ran a print shop, like PrintingForLess. Now I could tie my advertising onto actually getting a sale, or getting a good lead. You see why Google needed more relevant advertising before turning this on. They want only potential buyers to see an ad. Anything else is noise. Noise reduces buying behavior.

Well, something doesn’t jive here because according to Google the Pay-Per-Action ads are only going to appear on their Adsense content network:

Pay-per-action ads are eligible to appear on publisher sites in the Google content network, and publishers can choose specific pay-per-action ads that are relevant to their site to run in new ad units that they create.

So, for at least right now, Google is not putting PPA ads in their search results, which is the area that Scoble is talking about. So either Scoble is incorrect in his theory, or his Google contact gave him information that points to it being likely that PPA ads will be showing up on Google search results soon.

My first reaction is that people are jumping to lots of conclusions about what this program means, what it will do, who it’s competing with, and what it will mean for advertisers, publishers, and arbitrageurs.

I was going to refrain from making a post about this until I had really digested it more and potentially even tried out the beta program if accepted, but since Pete Caputa somehow confused me for being smart, I’ll at least post a few thoughts.

CPA is harder on publishers
There’s no arguing that with CPA ads, publishers take all the risk. This is good for advertisers, and generally it’s harder on publishers. However, GOOD publishers who understand CPA, persuasion architecture, delivering users who will convert, and funneling your site correctly, can actually make more money from CPA then they would from CPC or even a flat CPM. Publishers who don’t understand these things and are used the normal Adsense model will most likely struggle to generate more money with this ad type because of the difference in how you monetize a user.

CPA is a different ball game
There is an assumption that this will be a major challenge to affiliate networks like Commission Junction and Linkshare. Maybe it will be, but I can say that these networks provide a lot of value because they help advertisers create the right kinds of creatives and really optimize CPA. How much advice is Google going to really give on setting everything up? How much human touch will they provide to this process? With Google’s program, if the advertiser’s landing page sucks will Google consult to help them improve it? Sure, they provide access to their Website Optimizer Tool, but those who have tried multi-variate testing know that isn’t just a cut and dry automated process like Google is trying to make all of this.

Will this hurt lead generation or affiliate arbitrage?
I’m not sure I care. Businesses need to provide value, and if Google just made it more efficient so that it’s harder to arbitrage stuff, so be it. I’m not necessarily against arbitrage, but you can’t expect companies to leave things inefficient. Arbitrageurs are always looking for an edge, and most likely they’ll still find one somehow and somewhere.

Overall thoughts
Until we see the program in action, see what advertisers succeed with it, and how publishers can work with it and what types of results they get it’s hard to predict what will happen. The general assumption is that since Google has dominated with Adwords/Adsense/CPC they will dominate CPA by adding it to the mix. Well, Google HAS NOT dominated CPM and display advertising when they added it to Adwords/Adsense. I don’t think it’s a given by any means that this will work as well, however I do give it a better shot. I think the CPA direct marketing advertisers are closer to being the same group that does well with CPC now, while flat CPM and display advertising tend to be a different type of advertiser. It will be interesting to watch.