Why MSFT / YHOO Makes Sense for PPC Revenue

I’m working from the assumption that pay per click advertising is the most profitable form of advertising served by Google, Yahoo, and Microsoft today. It may not be the largest share of advertising on Yahoo or MSFT’s site’s today – display ads may still be larger – but the biggest money is in PPC search ads.

Assuming that’s the case, here’s the situation I see: Google has quickly become the dominant market leader in pay per click search, dwarfing Yahoo (formerly Overture, formerly Goto.com) and Microsoft’s slices of advertiser’s pay per click ad share.

At this point, pretty much every new advertiser entering the PPC ad space will start with Google. If you’re going to take the time to learn how to do this type of advertising, you may as well start with the site that will generate the most traffic for your time. Notice that I said “traffic for your time” and not traffic for your money. It’s quite possible that you could drive traffic at a lower cost per click on Google’s rivals, but there is also much less traffic to drive.

After starting out on Google, getting up to speed on pay per click advertising, and gaining confidence in this type of advertising, many advertisers will think, “I’d like to get some more of this PPC action.” So they look to either Yahoo or Microsoft next. After choosing one of those two, they spend time duplicating their previous efforts while learning a second pay per click advertising interface. Once their ads start running, they find that their 2nd choice provides only a fraction of the traffic of Google.

At this point, they start thinking about whether it’s worth going through the trouble with a 3rd PPC provider. Is it? Well, probably yes, but I get the impression that few do.

If Microsoft and Yahoo merged, there would suddenly be an obvious 2nd choice to Google for pay per click advertising.

Or, without merging, they could just make their PPC programs cross-compatible so a campaign set up and managed on Yahoo could also display ads on MSFT properties and vice versa.

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