Back when Overture was an independent company (2002-ish), and before that went by the name Goto.com, the company lived and died based on syndication partnerships. AOL was one of their huge deals. Since they were basically the only game in town, I’m sure they were able to sign some impressive contracts that worked well for AOL and extremely well for Overture.
Then Google launched their ad system and relatively quickly caught up while offering some new twists on pay per click such as wild card bidding on phrases and broad matches that allowed them to sell more inventory with less work on the part of advertisers. More money moving from advertiser’s hands into Google’s and Google’s syndication partner’s hands made negotiations much more competitive for Overture, I’m sure.
Google eventually took the AOL contract from Overture. Google couldn’t close an ad deal with Yahoo since Yahoo decided instead to gobble up Overture and very slowly work to catch up to Google technology-wise.
Since then, Google has become much less dependent on syndication partners for revenue. For example, Ask.com, as reported by Marketing Pilgrim, only accounts for 1/15 the revenue that Google generates on its own sites. While that’s still significant, who’s in the driver’s seat here? What are Ask’s options? Switch to Yahoo? Build their own platform? Take what Google gives them?
There aren’t many Ask.com’s around. What about the rest of us?
Google has figured out how to diversify their syndication partners to an extraordinarily fractured group of sites, including thousands – if not millions- of bloggers that have no negotiating power. For example, if you use AdSense on your site, do you even know what the revenue share of your relationship with Google is? If you found out that it didn’t seem fair, could you do anything about it?
GOOG closed at $625 yesterday with a market cap of $195 billion.