Giving Some Thought to Google, the ‘Potential Monopolist’
The Google-Yahoo partnership has theoretical implications for the search market and, by consequence, for the whole advertising market.
It’s reasonable to speculate that a successful test will lead to a growing role for Google in delivering advertising in response to Yahoo search queries. In the event this transpires, there will be a de facto consolidation in U.S. search.
Conventional wisdom asserts that there is an inherent commercial democracy in paid search. The party who bids highest and who achieves the highest quality score, comprised of price, relevance and likelihood to click, wins. And in a competitive market the price is capped by the incremental cost of the click to the advertiser in search engine A vs. search engines B, C or D and the total volume of clicks that the advertiser wants, needs or can afford.
In the world that existed before search engines, the "cost per" world was dominated by direct-response print, TV, mail and telesales channels, which offered abundant competitive choice and price/volume equations generated by that choice.
For many advertisers search is the best value in the market and made relatively better as audiences, and attention to other channels, fragment and the use of do-not-call and other commercial blockers rise. This explains the rise of search and the re-allocation of budgets from other channels.
Inevitably, the per-click price of search will continue to rise if other channels deliver less volume and efficiency, and, if not capped by internal competition in the market, they will rise to a fraction below the costs of non-search channels.
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