Google is firing back at the idea that its search ad deal with Yahoo will lead to higher search ad prices — the heart of the antitrust opposition the deal now faces in D.C., in the States, and in Europe.
Specifically, in a blog post, Google chief economist Hal Varian targeted some July research from online ad agency SearchIgnite that claimed that the deal would lead to 22% higher keyword prices on Yahoo! Varian:
After taking a close look at the study, I believe it makes several flawed assumptions and uses questionable methodology. The paper suggests that advertisers will be getting the same performance from the same ads, just at higher prices. We believe that advertisers will be getting significantly better performance at prices that reflect that improved performance.
What’s telling here, though, is that at no point in Varian’s argument does he say the Google-Yahoo search deal won’t result in increased prices paid for keyword advertising. So he seems to be acknowledging that prices will go up — just not 22%. Of course, if the deal didn’t result in higher prices, and incremental revenue for both Google and Yahoo, what’s the point?
Meanwhile, Google has a vested interest in discrediting the report before it becomes part of the various cases against them. Some of Varian’s other beef with the SearchIgnite report, in brief:
- The report fails to acknowledge that search ad prices are not set by Yahoo or Google but by advertisers, through the auction process.
- SearchIgnite’s assumptions are partly based on the belief that Yahoo will have the ability to see whose ads are priced higher–Google’s or Yahoo’s–and then decide which ads to serve.
- SearchIgnite assumed Yahoo will serve Google ads for as many search queries as possible, which is not Yahoo’s stated plan.
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