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Yahoo-GoTo deal - the beginning of the end?

too much success may be a bad thing for GoTo



5:55 am on Nov 14, 2001 (gmt 0)

i've said it before and i'll say it again: GoTo's reign may be temporary.

the Yahoo! deal proves the point: Yahoo is using GoTo to test the waters, evaluate the revenue potential, and acclimate their customers to the new paid listings. 6 months down the line they'll give GoTo the boot and manage these themselves. why share $ when they can have 100% of the revenue for themselves? and how much can it cost - really - to build a functional bid engine? a few million? they'll make that back in a month of clickthroughs - EASY.

advertisers are going to FLOCK to this advertisement opportunity on Yahoo. anyone who's had their head in the sand re: GoTo (and there are a lot of them, in the bigger Fortune 500 companies) will wake up when they hear "Yahoo". ESPECIALLY a CPC opportunity there. expect bid wars to get NASTY for the next 3 months or so, as more rookies with big budgets jump into the fray.

but back to the point. in 6 months Yahoo will bring the service in-house, and take 100% of the profits. and it will be a huge revenue boost.

it makes sense to bring it in-house because they already have the most precious commodity of all: traffic. GoTo is nothing without its distribution network. the question is whether or not they can convince their partners that its in their interest to let GoTo focus on the bid model, and share revenues. i'm betting not.

think about it this way: even if Yahoo and others roll out services that are far inferior in terms of advertiser management (ie. less sexy reports, inferior bid management tools, etc) they will STILL get advertisers business because they have a premium traffic base. thats all that matters to advertisers. 2nd tier PPC engines are 2nd rate precisely because they do NOT have GoTo's distribution base of legitimate, credible traffic. but GoTo has little control over that base, and is 2nd tier itself without it.

i'd also put my money on other networks (AOL, MSN, and Lycos) building out their own bid engines in the near future - even if it means buying their way out of their partnership with GoTo. it makes sense. the model is proven, and its hot. why share revenues when you can capture them all in-house?



7:47 pm on Nov 14, 2001 (gmt 0)

10+ Year Member

I think your analysis is astute. Basically, the success of PPC could sow the seeds of its own undoing. Polluting the waters, as it were. Taking that analogy a bit farther, if you have a lake that's slightly polluted, you don't want to eat the fish, but the fish live, so you can still catch them for sport. But once the pollution level gets too high, the fish die, and the fun is over.

And, OK, I admit it, I've written a couple of things about GoTo lately, and some of what I wrote was just dead wrong. :(

I have written three opinionated articles on the unfolding of the GoTo/overture phenomenon. The most recent one basically contended that Overture was overestimated, and reminded readers that PPC is a more general phenomenon that is being tried out by larger players like Ink (Index Connect), LookSmart (LookListings), and several others... so that Overture's main competition is not FindWhat as is often claimed by those who are looking at it too narrowly. While some of my points make sense...

[Overture Makes Graceful Exit from "Search Engine" Business:

I must admit that this article was pretty much off-base (for the time being)! Signing a deal with Yahoo is a major coup for Overture, and is as good as money in the bank (even if they only rake it in for 6 months). That cash should see them through the foreseeable future. So I was wrong wrong wrong! to underestimate Overture.

I do however stick by two of my previous articles - the first one written in March 2000 predicting that Paid Search Results are Here to Stay...

and also a second one (Aug 2000) that wondered on the other hand if there might not be unforeseen side effects of too much PPC (Scientists Baffled by Strange GoTo Phenomenon):

There are two trends at work:

(1) The savvy of consumers and their passion for unbiased search results - the net as an interactive informative non-commercial medium in spite of its largely commercial nature these days - will lead to declining clickthru rates for PPC links - consumers will flock to where they can do high quality trustworthy search (as Google has already shown - it is the #1 search destination today)

(2) The need for large media companies to build even more powerful distribution channels so that less savvy consumers are truly forced to see their content. Yahoo, notice, is finally getting into the ISP business by quietly signing a pilot deal with SBC Communications to pilot high speed access under the Yahoo brand. Doing more of this kind of thing with a "money machine" like Overture results firmly in place is just good business... at least if you can figure out how to keep people around and using your services. (AOL always had no problem finding a receptive group because of the way it targeted "newbies.") This was the "portal" phenomenon in a nutshell all along... "diabolical distribution channels" for online content, products, services, etc. It's the model that Godin and Locke and many of us say won't mesh well with this medium... the "broadcast model" ... the "shove it down their throats" model... yet for a time it WILL work, and you can bet that advertisers will be lined up in droves to use and discard this medium by getting as much of this cheap advertising as they can, while the getting is good. In the aftermath of all that, the savvy consumers (and their legion is growing) will be flocking to high quality search, high quality info, and topical interaction.

In other words, for every action there seems to be an equal and opposite reaction. GoTo's reign very well COULD be temporary. Many have fallen by the wayside foolishly trying to shove stuff down consumers' throats (AltaVista, etc.).

We are seeing the emergence of almost two "planes" of Internet usage - the ones that MSN, Yahoo, and AOL want to sell to - the less savvy, more receptive group - and the "legacy Internet" group which are much more discriminating, more interested in the net as a true medium for research and unbiased information, and oh yeah this latter group probably has really high disposable incomes on average so it would probably behoove at least some people in this industry to figure out how not to annoy this latter group with popups, PPC, etc. ad nauseam!!



P.S. I think I'm going to put more $ in my Overture account now. :D

P.P.S. For my rambling view on "Why Search Engines Must Continue to be Referees" (it's a question of legitimacy, which in the field of search, evidently matters a great deal to end users)... see [snip url]

(edited by: Mike_Mackin at 8:32 pm (gmt) on Nov. 14, 2001)


9:34 pm on Nov 14, 2001 (gmt 0)

10+ Year Member

Mike, snip out the URL's if you please, but also, show a little respect by not making snide comments after my post. We could have had this offline but instead you chose to embarrass me. I would just as soon you deleted the whole post if you're going to pull rank like this.

Too bad, I thought this forum was going to be different from Jim Wilson's little club.

For christ's sake, I'm not making money promoting my ARTICLES. Would it kill you to post a few links?

It's really, really too bad that you did this, since I was about to send the link to this discussion out to a list of 8,000 people. I think links are a good thing. Stop being so small-minded. It's not like you don't know who I am and it's not like my post was spam.


9:37 pm on Nov 14, 2001 (gmt 0)

WebmasterWorld Senior Member agerhart is a WebmasterWorld Top Contributor of All Time 10+ Year Member


You have to understand the TOS [webmasterworld.com] that WebmasterWorld has in place. The snipping of the URL's is not a power move or anything personal. If we allow URL's to be dropped once than we risk the opening of the floodgates......not something that we want.


9:42 pm on Nov 14, 2001 (gmt 0)

10+ Year Member

TOS or not, there is a diplomatic way to do stuff like this, and it doesn't include making rude comments on a public forum.

I don't like spam any more than you do, but when I know who the person is, I cut them some slack. Why would you want to embarrass a friend?

So, for whatever reason, I must conclude that Mike Mackin and I are not friends, or he would have chosen to handle this otherwise.

I stand chastened like a first-grader,



10:10 pm on Nov 14, 2001 (gmt 0)

WebmasterWorld Senior Member 10+ Year Member


>I would just as soon you deleted the whole post if you're going to pull rank like this.

That was suggested via Email by members.

Your articles are very knowledgeable. Put the site in your profile and we will move on.

>instead you chose to embarrass me.
That was not my intention.

>I stand chastened like a first-grader.
You ARE NOT a first-grader and we are interested in what you have to say without the urls.

Stick around and be apart of WebmasterWorld. :)


10:40 pm on Nov 14, 2001 (gmt 0)

WebmasterWorld Senior Member nffc is a WebmasterWorld Top Contributor of All Time 10+ Year Member

>TOS or not

There is no TOS or not, you either agree to the terms of service or you do not, that choice is up to you.

>there is a diplomatic way to do stuff like this

If you don't feel that "Andrew, my man, don't you think that 4 references to your site in one post is a bit excessive?" is not diplomatic then we will have to disagree.

>but when I know who the person is, I cut them some slack

To be frank, we don't care who you are, just what you say, all the members here are treated equally.

>Stick around and be apart of WebmasterWorld

What he said!

Having said that lets keep on topic and the topic is.....

"Yahoo-GoTo deal - the beginning of the end?"


11:43 pm on Nov 14, 2001 (gmt 0)

WebmasterWorld Senior Member 10+ Year Member

>GoTo is nothing without its distribution network.

I have a question:

Do you think Overture has better scales of economy than the SE's would individually? Overture has one customer service department, one IT department, etc... working on many affiliate sites, each sharing the cost. When all of these SE's start a PPC "division" of their own, they will have to hire more people, pay them benefits, etc... I am thinking that even though they will be missing out on a little profit after all of the costs, it might not be worth the hassle for many of the big boys. And the extra profit notion is questionable too IMHO. People bid so high on the keywords BECAUSE of the large affiliate network. If the results were not seen across many sites with the potentials for huge traffic, my theory is that the bids will be much lower, and revenues much smaller. When you have to manage individual PPC programs, each gets less attention and less important. When it seems less important, people are willing to bid less. Seems like It might not be a winning situation. Any comments to this?


11:51 pm on Nov 14, 2001 (gmt 0)

WebmasterWorld Senior Member 10+ Year Member

Posted today. [webmasterworld.com]
"Greg is missing an important element here.
They would have to add a large editorial staff to address the issue of relevancy.
I DO NOT see them hiring additional staff."


12:16 am on Nov 15, 2001 (gmt 0)

WebmasterWorld Administrator skibum is a WebmasterWorld Top Contributor of All Time 10+ Year Member

Agreed. It would seem that YAHOO! would have to incur a rather large ongoing expense to kick off its own PPC program in the form of an editorial staff.

If it is in the works, the GoTo test would give them some indication of the volume to expect and what it would take to ramp up.


12:20 am on Nov 15, 2001 (gmt 0)

WebmasterWorld Senior Member littleman is a WebmasterWorld Top Contributor of All Time 10+ Year Member

I think seoboy has his points. In this hungry landscape Yahoo will hoard what it could. I really see this happening. They already have a staff that looks at sites every day to see if they are relevant to the title and description in the yahoo directory. How hard would it be to adapt? The clickthrough software is also no big deal.

>scales of economy

I don't think this is really an issue. The software costs are probably close to fixed. So it will cost less per transaction the more it is used, but it is the human hours that will be the big cash sucker. And that is not going to go down much per unit as bids increase.

I'm afraid the only loosers here are us, as optimization once again is squeezed by ppc.


1:24 am on Nov 15, 2001 (gmt 0)

WebmasterWorld Administrator skibum is a WebmasterWorld Top Contributor of All Time 10+ Year Member

Currently YAHOO! gets 300 big ones per review. Anyone know what GoTo averages per review? Could be anywhere on the map. If YAHOO! had a higher minimum bid and could get that number up ($$/review), maybe combined with a larger monthly minimum they could find a way to crank out the cash.


1:28 am on Nov 15, 2001 (gmt 0)

WebmasterWorld Senior Member 10+ Year Member

Yes skibum, I was mostly speaking of the editorial and customer service staff when I mentioned economies of scale. The people certainly are the most important. What about bid prices? Do you think there would be less competition on a Yahoo! solo PPC system, vs. Goto with all of the affiliate rankings at stake?

I really believe that there will always be fewer advertisers on a PPC for a single site, therefore reducing bid prices, therefore reducing revenue to the hosting site. Goto's ability to get you visibility to such a large user base and drive so many clicks makes the listing worth more, IMHO.


2:29 am on Nov 20, 2001 (gmt 0)

right now Overture splits revenues with its distribution sites. so that means these sites are only getting 50% or so of the generated revenue from clicks...

with all things equal, this means they would only need PPC's at 1/2 what they are with Overture to break even.

this is a simplification of course - they'll actually need more because they'll have additional costs (review staff, etc). but how much lower would you expect PPC to be on Yahoo, or AOL, or MSN, versus on Overture itself?

my guess is the prices would be pretty similar - no less than 80% of Overture rates. never underestimate the lure of Yahoo, AOL or MSN to advertisers with deep pockets...

its true that there's some benefit to centralization - ie. increased price competition. but i think the numbers might make it more favorable to have 100% of the revenues, even at a lower average PPC.

just a guess. only the sites will know for themselves. i guess we'll see over the coming months.



6:29 pm on Nov 22, 2001 (gmt 0)

10+ Year Member

Hi Guys,

My company spends over $500.00 a day with goto.com (overture)(stupid name change).

I oversee all the marketing costs. I would have to say although I think yahoo will PROBALLY do the ppc thing themselves, that the bids will not be as high as with goto.com

I have noticed every time goto adds a new affiliate the bids start creeping up. And stay up! :(

The main benifit goto gives me is a very easy way to drive ALOT of traffic from I place. Its all about customer service. I am just to busy (as are most of us SEO people)
to be chasing down every ppc engine and changing bids. goto makes it easy.

Mabey the 6 month deal with goto is a trial period. Then yahoo will keep saying that they will do their own and then re-nagoiate the deal with goto: IE tell goto to give up a higher % of the money! Things that make you go Hmmmmmmm.....Thats what I would do if I was Yahoo.....and was SMART!

btw: happy thanksgiving all :)


10:23 pm on Nov 29, 2001 (gmt 0)

Great info seoboy !

Altavista has also done this with some search terms. "featured listings" are displayed above overture results.
Some of msn featured site listings are bidded.Also looksmart has it's own featured site PPC deal.

I think yahoo will start with a program that is similiar to google premium ads.

Why should a large company that offers so many services-use overture ?

How many search partners had overture last year ??? ;-) Things can change quickly.

i hate overture ....


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