AOL, Microsoft, Yahoo Join in Ad Partnership

In a move clearly intended to fight off Google, AOL, Microsoft, and Yahoo banded together to start selling ad inventory on each other’s sites. Whether these rivals can work together – and whether it will make a difference in the end – remains to be seen.

As Peter Kafka explained, writing for All Things Digital, the three companies “have agreed to sell each other’s ‘Class 2 display’ inventory – graphic ads the companies can’t sell on their own and would normally hand over to ad networks.” The firms gave a dinner presentation in Manhattan this week covering the plan. Attendees included prominent web publishers and ad buyers.

The point of the presentation went beyond news of the new partnership. The three companies hope to talk some of the larger web firms into sharing their ad inventory, thus creating a larger consortium – something that might attract those large ad buyers and get them to part with some of the money currently going to ads on Google.

But how, exactly, will the ad sharing work? Kafka explained that if, for example, “AOL has a big order” for certain kinds of ad impressions, “it will fill it with its own inventory as well as with what’s available from Microsoft and Yahoo.” The three firms will split the ad revenue, which will supposedly be greater than it would have been if they’d sold the space through a third-party ad network.

This leaves ad teams at Yahoo, AOL and Microsoft with a bit of a challenge. How, exactly, are they going to promote each other’s ad space? These three firms have been rivals for a long time; cooperation may not come naturally. A bit of retraining and possible arm-twisting might be in order. And then there are the risks of a failure to communicate between the three ad departments; it would be way too easy for the sales team at one firm to promise ad space to a customer, only to see it get sold out from under them.

The three firms will have some time to work things out before the end of the year, when the plan gets put into force. It’s worth noting that there’s no exclusivity agreement in place, which means that any member of the group can work with any ad network or ad tech company – even Google. With the search giant moving into display ads, however, such a move would really be consorting with the enemy.

This is not the first time such an online ad consortium has been attempted. Back in 2009, News Corp tried to put together an ad coalition featuring important web companies, including Microsoft, Yahoo, and AOL. Indeed, this latest plan had its roots in an earlier attempt. Start-up company 5to1 tried to create “an online advertising alliance consisting exclusively of major media players.” When Yahoo bought the start-up earlier this year, the venerable search engine told 5to1 CEO Jim Heckman to work on a similar arrangement for Yahoo. This is the result.

A number of readers commenting on Kafka’s piece seem unimpressed with the likely results of the deal. Notes one, “I’ve been running campaigns on all networks for many years, and all I can say is, it won’t make much of a difference. If you add up all the traffic from the 3 properties involved, you still only have a fraction of what Google can deliver.” Other readers agreed. Still others criticized the fact that ad sales would be limited to “remnants.” Adam Berberich noted that “Remnant media is like the sale DVD bin at Best Buy: yes, occasionally you’ll find a cheap gem like ‘Young Guns II’ or ‘Happy Gilmore,’ but most of the time you’re stuck with crap like ‘Big Momma’s House 2′ or anything with Kevin Sorbo in a starring role.”

A lot may depend on whether the three companies can convince other firms to share their ad inventory, and get ad buyers to use the consortium. To make those sales, however, the consortium will have to convince the buyers that they actually offer enough bang for the buck – more than Google. That’s likely to be an uphill battle.

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