Why Behavioral Marketers Should Care About Yahoo's Future

Online marketing news in recent weeks has been dominated by the back and forth among Microsoft, Google, and Yahoo. Awareness of dynamic interplay between search and online display advertising is losing out to coverage involving the sexier debate about market size, consumer reach and access, corporate cultures, motive, and the pairing of Yahoo with Microsoft or another potential suitor.

Will there be a single search monopoly? My guess is no, though some further consolidation is likely to occur. And because there’s already a small group of dominant search players, consolidation will likely mean increased costs for search advertising buyers.

Why should behavioral marketers care? The synergy between search and media, in large part, allows integrated online programs to scale. The coming search market consolidation may cause click price increases that will put pressure on all programs and limit the ability of the program to show ROI (define).

Media and search have always worked together. Simply put, search absorbs the marketplace’s existing demand, including demand created by on- and offline media, while online display advertising creates awareness, interest, and action within a targeted, relevant population. When targeting is based on observed behaviors, as with behavioral targeting programs, those programs may be fulfilling demand that has already been expressed. Or these programs may be creating new demand more typical of contextual or demographic display programs. Behavioral targeting, with a few tweaks, can play a valuable hybrid role to support the many needs of a challenged program.

Challenged Budgets Impact All Programs

Sophisticated marketers are well aware of online channels’ codependency on each other and will spread increased costs in one channel across them all to maintain an optimal mix under changed circumstances. Search retargeting is one way behavioral targeting can help drive up search conversions. Search retargeting ensures that abandoned searches are followed by the serving of ads related to a previous search. This technique helps monetize clicks that might have been wasted and exemplifies how online tactics have become intertwined.

As search costs rise, behavioral targeting will likely be a channel that marketers will lean on to compensate for the increase spend on search clicks. Adjustments must be made both in tactics and budgets for that to response to make sense. Reporting of program results should likewise move to something more integrated.

For most marketers, the best ROI gains still exist on the site side, so this price pressure may force marketers to finally clean up their sites, streamline their conversion funnels, and improve the customer experience. An improved site will also buoy conversions for behavioral and other display media. This is good news because behavioral targeting has its own ROI objectives to meet.

What Would Consolidation Mean?

After Microsoft’s last failed attempt at a full acquisition of Yahoo, rumors have been swirling about Microsoft possibly purchasing Yahoo’s search product. While ruling the software industry for many decades and definitively winning the browser war, it has never been as big an online power player as Yahoo or Google. Taking over Yahoo Search would change all that.

The combined powers of Microsoft and Yahoo would create a credible rivalry with Google in online advertising, possibly forcing more competitive pricing for all parties. But what if Google bought Yahoo? Though this is still a possibility, it looks less likely.

Speculation continues, but we still don’t know what will happen with these three titans vying for online world domination. Microsoft could end up with more online power by acquiring Yahoo Search, but Yahoo’s behavioral data, especially following the BlueLithium acquisition, is a significant factor to consider by itself. If Microsoft took over both branches of Yahoo, Google would have a real run for its money in the online advertising marketplace and free competition might restore balance.

In a bid auction universe, the primary competition that drives click prices is marketer versus marketer, not engine versus engine — though economics would tell us that the loss of a significant player would limit marketer options and access to consumers, making that access more expensive. Truth be told, we don’t really know how this will play out. Whatever happens, behavioral marketers must be ready to adjust overall program goals taking the broadest view possible of online success.