Online display ads account for around a third of the $40 billion online ad market. Advertisers mainly commission display ads to apprise internet users of their presence and not necessarily in the hope of immediate results. But click-through rates for display advertising have slumped to such abject levels that it is just too optimistic to expect immediate results with banner ads.
After Yahoo turned down Microsoft’s proposal to roll in the hay and have an offspring that could take on Google’s might in the online search market, it appeared the two would maintain a distance from each other. However, a luncheon meeting between Ballmer and Yahoo Chairman Roy Bostock earlier this year again revived hopes of a deal.
The New York Times reports that the two companies have returned to the negotiation table, though for a slightly different purpose. A source close to the discussions told the NYT that the two companies are discussing an advertising deal. The source revealed that Microsoft could assume control of Yahoo’s search ads and leave Yahoo in control of display ads under one arrangement being deliberated. Steve Ballmer is also said to have met with Yahoo CEO Carol Bartz last week. There is no official word on the matter as yet.
Google recently shut the door on Microsoft with a major online ads deal with Yahoo. Having warded off any possible threats to its throne in the immediate future, Google can look to consolidate its gains. And consolidate it will. Mark Mahney, financial analyst at Citibank Investment Research, expects Google to earn $1 billion from display ads alone in 2009.
Currently Yahoo is the leading player in the global online display ads industry – not to be confused with search ads - worth $22 billion annually. Google will be able to trim Yahoo’s lead in 2009 by auctioning display ads space across its bouquet of prime internet properties that includes Youtube, Google Videos, Images, Maps and Finance, and DoubleClick.
The internet juggernaut has finally solved its Youtube conundrum and will start feeding video ads to the website’s legion of video buffs. Mahney anticipates $500 million in Youtube display ads sales alone in 2009.