Advertiser reaction to Yahoo-Google deal: Ack!

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Heads are still spinning after Yahoo and Google announced a deal yesterday that would allow Google to display its text ads on some of Yahoo’s pages. Especially the heads of advertisers, who poured $8.6 billion into search engine advertising in 2007, according to research firm EMarketer.

We checked in with a few of them to ask if they thought the deal was the best thing since sliced bread, the worst thing since ‘The Real World’ or a little bit of both. The conclusion? A Microsoft-Yahoo alliance would have been much, much better. Now, advertisers worry that they will have to pay more for search marketing terms -- oh yeah, and that Google will dominate the world.

First, since it is Friday the 13th and it doesn’t hurt to look on the bright side, the positives:

• Yahoo is going to have help selling ads that appear with some of the more obscure, or ‘long-tail,’ terms that people search for (like, say, ‘Swedish basketballers’). That means advertisers looking to buy those terms will get more eyeballs.

• Advertisers will have to make even less effort to buy search ads. Before, they had to pick up the phone -- or mouse -- and contact Google, Yahoo and Microsoft (however did they manage?). Now, they can skip Yahoo if they want to.

• Now that it has more inventory, Google might create more options for advertisers interested in search. Currently, they can buy keywords or specific ‘content’ sites -- but some advertisers would be even happier if they could buy keywords on content sites.

Of course, there seem to be a lot more negatives ...

... for advertisers to dwell on. A few of their concerns:

• World domination by Google. It seems that a blogger named Urgo isn’t the only one with this fear. Advertisers worry that Google already has too much information about where people are going on the Web and what advertisers are paying to reach them. Now it will have even more.

• Higher prices for search terms. Currently, both search engines give advertisers a range of prices for a certain term –- if they wanted the word ‘automotive,’ for instance, they’d be told they could bid on a certain range of prices for top placement. If Yahoo and Google agree on pricing beforehand, advertisers will pay more. Even if the two companies aren’t that underhanded, there will be more bidders competing for the same ad spots, so prices will go up.

• Decreased competition. Yahoo could put its own search marketing arm out of business if it increasingly relies on Google’s ads because they’re more lucrative. Then, only Microsoft and Google would be left as the big search players. As Adam Smith tells us, less competition isn’t good for business.

• This wasn’t a Microsoft-Yahoo deal. That would have created the only thing close to a competitor to Google because the entity fondly referred to as Microhoo would have reached a whole lot of eyeballs. Now, Google gains even more dominance.

Of course, all of this is speculative. With the deal just announced, most advertisers say they won’t really know what’s going to happen until they find out more specifics. Or until their heads stop spinning.

P.S. Thanks to Oliver Bishop, chief executive of digital marketing firm Steak; Janel Landis, senior director of search strategy at direct response agency SendTec; Patrick Benson, senior vice president and director of digital innovation at agency Deutsch New York; Tim Hickernell, lead research analyst at Info-Tech Research Group; Aimee Reker, senior vice president and global director of search at digital agency MRM Worldwide for the insights.

-- Alana Semuels

Semuels, a Times staff writer, covers marketing and the L.A. tech scene