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12/29/2005
  Prediction: Google MORE dominant in 2006

Despite what many people think, Google is still on the upswing, and will be MORE dominant in 2006 than they are now. Why? Simply because Yahoo is going to get weaker in the search-driven ad space, and Microsoft is not going to be a serious competitor.

The search-driven ad and lead marketplaces are "winner take all" with respect to inventory. Google is sewing up more inventory (e.g. more AOL) while their main competitors are splitting up the same inventory.

Google has the biggest liquid market for search ads, and for contextual ads (i.e. AdSense). By a LOT. And their lead will get bigger in 2006.

And if the ad market softens, guess who is still in the best position? The one with the most inventory. Google's black-box pricing flexibility doesn't hurt either.

The inventory advantage is huge because it creates more relevance. More places to show ads means more advertisers and more creative (ads) to show. It's easier to put good, relevant ads in the right place.

As Yahoo's contract with MSN expires and Yahoo loses the right to display ads on MSN in 2006, Yahoo becomes less attractive to advertisers since it has fewer impressions/clicks to sell. Yahoo will also revamp their ad system which will confuse people for a while.

Microsoft doesn't have the inventory clout of Yahoo or Google, and their current ad system is not very well understood by the SEM world - i.e. no one has figured out how to do better with MSFT ads than they already do with Google.

The fact is that most businesses and SEMs just don't have the time to muck around with Yahoo and Microsoft today. They spend 80% of their time and energy on Google.

 


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