Ad Wars: Yahoo! Versus Google?

As far as Web site advertising goes, there is a lot of room for a lot of people. However, Google’s AdSense has really risen above the rest as far as quality goes. Nobody can doubt the success Google has had so far with AdSense, but now with Yahoo! and others trying to get into the same market, what can they really do to compete with Google?

Google’s Web site advertising program, AdSense, is about to have some fairly hefty competition. Yahoo is testing a “long tail” ad words scheme.

Markets thrive on competition, and Google’s first mover domination of the adwords market has been inviting a serious challenge for some time. A billion dollars a quarter is enough money to tempt new entrants.

Google and Yahoo! and Microsoft already compete on search word advertising; but on the literally millions of Web sites which display “ad strips,” Google has enjoyed an effective monopoly. Exploiting first mover advantage, Google has its AdSense code on everything from the New York Times to TCS (over to your right) and little blogs and Web sites which may get all of 20 hits a day.

Google, with its “do no evil” corporate philosophy, has used its virtual monopoly to invent, perfect and, to a degree, police, the emerging market for text based, context sensitive, advertising. While Google was the only game in town, publishers and advertisers have been playing by its rules.

The commercially critical “no clicking your own ads” and “no offering inducements for clicks” commandments make perfect sense. However, Google also imposes content rules on its publishers by refusing to accept alcohol, tobacco, pornography, gambling, illegal drug, legal drug advertising. As well, there are rules against displaying ads on adult sites or sites which are controversial - as several bloggers have found out. Plus, publishers have to obey rules against disclosing pretty much anything about the program, including how much a publisher makes a month, what clicks on particular ads are worth, and what the clickthrough rate for a given ad or Web site is.

[What Yahoo! Can Do to Compete With Google?, continued]