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Wednesday, June 22, 2005

Ad Revenues & Ulterior Motives

Contrary to what many assume, there remains a lot of useful online ad inventory out there. Those who own good chunks of that inventory are holding tight to it, consolidating it, and trying to grab more of it.

Consider the photo sharing service Flickr, recently acquired by Yahoo. As with search several years ago, it's all the cool aspects of the service itself that catch our attention. The ads that appear on the site are almost an afterthought. Consider, though, how much ad inventory this potentially represents. With upwards of tens of thousands of user-tagged pages that aggregate photos on every conceivable theme, you're talking about a highly targeted ad opportunity that is sizeable enough that it makes a financial difference to the owner of the site.

Up to now, Flickr has been experimenting with both Google AdSense and Yahoo Publisher Network ads. They look similar, and both offerings are evidently struggling to serve relevant ads on these pages. Sometimes they have to fall back on generic photo or blog related ads -- not necessarily a bad thing. Other times, geographic and other markers allow them to show more targeted ads.

What do you think the odds are, now that Flickr is owned by Yahoo, that they'll drop the AdSense ads and go exclusively with the Y! ads? I'd say close to 100%. This just goes to prove that in the runup to an acquisition by one of these two hot competitors, it's not always just about the technology or the strategic value of the team being acquired: you have to factor in the race to own as much targeted ad inventory as possible. That 100% revenue share is tough to ignore, especially considering the fact that revenues are often shared very generously with publisher partners.


Posted by Andrew Goodman




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