Are AOL, Yahoo and Microsoft desperate?

September 15, 2011: 2:30 PM ET

Word leaked that the three players may work together in the ad space -- and the initial reaction is nothing short of discouraging.

AolFORTUNE -- Could the news that Microsoft (MSFT), Yahoo (YHOO) and AOL (AOL) are planning to join together to sell ads on each other's sites be a trial balloon –- a leak designed to test reaction?

If so, the early responses aren't so encouraging. AllThingsD broke the news on Wednesday, reporting that executives from all three companies made a presentation to "a group of top Web publishers and ad buyers" at a dinner in Manhattan on Tuesday night. Not the epitome of stealth.

In a statement to Adweek today, a Microsoft spokesman said: "We believe that choice, openness and competition help drive innovation in the market.  As such, we are always looking for ways to partner with others in the digital advertising ecosystem to offer innovative solutions that benefit advertisers and publishers. However we have nothing specific to share at this time,"

In other words, yes, we're doing this, and yes, we've already got the marketing boilerplate prepared, but no, we don't want to officially announce it until we see how caustic the criticism will be.

Pretty caustic, so far. The idea has "a whiff of desperation about it" is the consensus of the media buyers interviewed by AdWeek, writes that publication's Ki Mae Heussner.

Those buyers, who don't see much advantage for themselves in the arrangement, wonder how much better the companies will be than outside ad networks are at handling so-called "Class 2 display inventory." Yes, they'll get more of the revenue, but they'll have to make their systems work together, and they'll have to get their sales staffs to sell ads for companies that are, after all, supposedly their rivals.

That brings up another potential problem -- the federal government is closely scrutinizing the online advertising business for antitrust concerns. This alliance could draw regulators' attention. The companies could be testing those waters, too, before formally announcing the plan.

The ads in question represent leftover display inventory that the individual companies can't sell on their own. Currently, such ads are handled by ad networks that, of course, take a cut. This arrangement will allow the three companies to keep all the revenue and share it among themselves.

The presence of Microsoft no doubt helps. It would look even more desperate if it were just Yahoo and AOL, both of which are faltering. Microsoft wants to take business away from Google (GOOG), but if this doesn't work out, it won't be a huge deal to the company, which makes most of its money on software. It's a much bigger deal to Yahoo and AOL, whose businesses depend on advertising, a market that Google increasingly dominates.

Posted in: , , ,
Join the Conversation
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.