News

Microsoft and Yahoo Put Search Ads Under One Roof

• By Kurt Mackie
• October 27, 2010

Microsoft on Wednesday added to its search advertising partnership deal with Yahoo by consolidating the ad platform used by Web advertisers in U.S. and Canadian markets.

The Microsoft Advertising adCenter now works across Microsoft- and Yahoo-operated properties in the United States and Canada. Advertisers can use Microsoft's ad platform to reach an "audience of 163 million searchers in the U.S. and 15 million searchers in Canada," according to David Pann, general manager for the Microsoft advertising search network, in a blog post.

Pann noted a bit of catch for adCenter users -- namely, it might cost more, at least in the short term. The system works in an auction-type format, with advertisers bidding on key words to associate with their products. Pann described a transition phase that might entail higher ad rates.

"As advertiser demand grows and drives competition in the adCenter auction, the increased competition may result in higher costs per click (CPCs) in the initial weeks following the transition," Pann explained. "As advertisers experiment with bidding on each keyword to determine what works best for their campaigns, we expect these prices to stabilize within weeks."

It's not clear how this stabilization of prices will take place, especially when there are fewer search advertising outlets available now. The usual expectation of market economics is that prices will increase as the supply (of ad platform outlets) decreases. Still, advertisers that may have been bothered by dealing with two ad platforms now get just one -- Microsoft's adCenter.

Microsoft completed its search engine integration with Yahoo in the U.S. and Canadian markets back in August. Microsoft's Bing is now the default search engine that powers Yahoo's search sites as well as Microsoft's in those markets, although Yahoo maintains its own branding and user interface.

Microsoft expects to pay about $100 million to $200 million in the first year of its search advertising deal with Yahoo. Part of the arrangement is that Yahoo will broker the ad sales. Pann explained that Yahoo is handling premium advertiser accounts. For other accounts, he pointed to this transition page.