If 2005 was the year that Google took search over, then 2006 will be the year we begin to think of Google beyond search. While many of us prepare for a long and lovely holiday, Google, AOL and Microsoft executives were working on pulling together partnership arrangements to carry the companies into the New Year and beyond.
The search world at large has been waiting to see what type of an arrangement would be executed between the internet giants. Would Microsoft secure a lead in the search business by replacing Google as the search provider of choice for AOL? Until recently Google was thought to be a distant second in the play for AOL search audience share.
Yesterday, the Google and Time Warner/AOL deal was ratified by executives on both sides. A billion dollar partnership that pushed Microsoft out of the AOL fray, at least for the time being, could be very lucrative for both sides, and there will be ramifications for both sides.
While much of the deal has yet to be disclosed, according to widely published reports, and as the headline read in the New York Times Saturday, December 17, Time Warner has agreed to sell five percent of AOL to Google for $1 billion. Since Google already served ads into AOL's search results there really shouldn't be a need for a big change, right?
Search advertising is a mish mash of advertising and organic links mixed in with a confusing array of local and regionally targeted options and content areas. Some search providers sell their own ads while others rely on listings provided by competitive sites with a bit of revenue shared.
Google serves ads on AOL and Ask Jeeves, but Jeeves also serves their own ads. MSN serves up Yahoo! Search paid listings, but plans to go completely on its own. Revenue sharing, or paying for the privilege of sharing audiences, is costly. For example, of the $500 million of revenue Google had with AOL in 2005, only about $70 million stays with Google, according to the New York Times.
Not a bad deal for AOL
The problem is that users might just wise up to the fact that search results and ads are coming from elsewhere and head on over to another site to execute search activity. It costs a user only a few seconds to make the transition; when it comes to search, user behavior has repeatedly shown that direct is better.
But wait, there's a bit more to it.
The new arrangement between Google and AOL will allow for placements of special AOL content in Google search results. Google has also agreed to carry the AOL logo in this content area.
In other words, Google has sold a piece of its search results page.
However you might read the above statement, one has to ask if this might be the beginning of the end for Google. The clean non-sexy home page that made Google was corrupted early this year by urging users to download the Google Toolbar shortly after the Sun Microsystems partnership was announced.
Google has also agreed to incorporate AOL's vast video content into its search results. This is another move that might just spell disaster since users generally gravitate toward a specific vertical site for content like video. The issue of integrating additional, otherwise competitive content into search -- along with the question of ethical integration of revenue generating content -- has yet to be addressed.
Adding more perplexity to the partnership, Google will be providing AOL with technical assistance in building content that can be ranked better in Google's natural results, again according to the New York Times. Though Google has stated the ranking algorithm will not be affected by this assistance, I really hope other content providers don't mind the preferential treatment.
Microsoft loses… maybe
Many industry prognosticators (including yours truly) thought the deal was heading in MSN's direction. It makes sense for AOL to keep its options open, particularly with the software and operating system arrangements in place. MSN also has an arguably better targeting system in place for search advertising, but that is a minor issue compared to other considerations in developing a relationship with AOL.
AOL sales representatives will be selling Google advertising solutions. The upside is that AOL will have a more diverse array of advertising product offerings, but they will also be competing with Google's sales efforts. MSN has no such baggage and has been very clear about building a better search site and the need for better, target rich results.
While is Google is busy sorting out the partnership with AOL, MSN can focus its efforts on enhancing the user experience and leveraging software integration. Microsoft is still the leader in software and operating systems, and we have yet to see how that integration will play out in the minds of Microsoft customers.
The underlying issues of ethical advertiser positioning, preferred placement and the subsequent offering away of precious brand identity begs the ultimate question: has Google sold out?
Probably not. The AOL relationship was necessary to push Microsoft away, but a better question might be, has Google given too much away?
2005 illustrated Google's dominance in the search world. We also saw Google reaching out to users with a more aggressive approach to finding information on the desktop while bidding to be the wireless internet provider for San Francisco's surfers.
In 2006, we will see more diversity in offerings from search sites. The face of directive search will continue to make a slow migration towards a one-stop solution for everything a human may wish to find. Search will migrate from convenient utility to necessity, and the battle for mindshare will continue with a few bizarre twists along the way.
iMedia Search Editor Kevin Ryan's current and former client roster reads like a "who's who" in big brands; Rolex Watch, USA, State Farm Insurance, Farmers Insurance, Minolta Corporation, Samsung Electronics America, Toyota Motor Sales, USA, Panasonic Services, and the Hilton Hotels brands, to name a few. Ryan believes in sound guidance, creative thought, accountable actions and collaborative execution as applied to search, or any form of marketing. His principled approach and staunch commitment to the industry have made him one of the most sought after personalities in online marketing. Ryan volunteers his time with the Interactive Advertising Bureau, Search Engine Marketing Professional Organization and several regional non-profit organizations.
Mr. Ryan is Managing Partner at Kinetic Results.