An interesting article came out in this morning's WSJ (http://online.wsj.com/article_print/SB120787375527206619.html) taking a look at what the online advertising space might look like if Yahoo! goes through with any of the proposed merger transactions that are currently on the table. Some industry experts have gone on record to say that the current action in the marketplace is the "online-media industry's equivalent of nuclear war. Nothing short of a new world order in this space is up for grabs."
That's pretty intense. But based on what we've learned in class, we can see that the landscape really is changing for online advertising forces Google, Yahoo!, Microsoft, and AOL. Advocates of industry consolidation are optimistic that a Yahoo! + Anyone-but-Google joint entity would help spread the power away from that superpowered search engine (we already saw yesterday how Google has tremendous marketshare in terms of publisher coverage for website with less than 100,000 unique users per month). Also, have fewer players would mean greater streamlining of the various ad platforms that currently exist.
However, critics point out the potential for harm as well. Fewer competitors could translate into a less liquid market for advertising inventory pricing. An ad executive said "If all of a sudden the cost-per-click prices go very high for Google and the return on investment goes down, you can instantaneously move money away from Google and into Yahoo. If you lose that option to move money into Yahoo or a Yahoo-Microsoft combination, the only option is to retreat from the search market, lower your spend, or grin and bear it."
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