The news Yahoo! will reduce the levels of UK paid search commission it gives to agencies as of 1 January 2009 begs the question: is the search engine simply responding to Google's removal of Best Practice Funding (BPF)?
While Google is removing their agency kickback scheme as of 31 December 2008, Yahoo! is only decreasing commission by 1%, seemingly not all that dramatic a move.
But at Greenlight we consider it an ill-timed decision. The commission structure at Yahoo! gave advertisers a solid reason to opt for the search engine. Yahoo! has watched advertisers remove money and plough it into Google over the last six to 12 months. But we wonder if the commission cut will substantiate the trend rather than reverse it.
So why make the decrease? Yahoo! sees it as part of a brand-strengthening process, which also makes the search advertising process fairer for all those involved. But we'd argue advertisers still need incentives to choose Yahoo! over Google, which enjoys the lion's share of the market. Especially as the quality of traffic has decreased recently and increased the overall cost of advertising with Yahoo!
A further point is that although Google's move is more extreme, they did at least give agencies 15 months' notice. Yahoo!, on the other hand, has only just announced its plans, less than four weeks before the commission decrease takes effect.
We believe search agency commissions will all but disappear by the close of 2009, with kickbacks slowly retracting over the course of the year, and even the relatively young MSN following suit. From advertisers' points of view, this will make for a level playing field with advertisers using certain networks because of their merits rather than the cash incentives they provide.
In a further development from the search engine colossus, advertisers will now be able to target iPhone and G1 users, thanks to a recent update to AdWords.
Specifically, advertisers are allowed to run campaigns that are tailored for mobile handsets with full internet browsers, in a nod to the massive increase in use of these devices.
Google's Product Marketing Manager of the Mobile Ads team, Alexandra Klein, says, 'Now, advertisers will be able to display ads exclusively on these mobile devices, create campaigns for them and get separate performance reporting.'
Meanwhile, Yahoo! has strengthened its mobile presence in the UK by signing a deal to offer Virgin Mobile's 4.4 million customers mobile search through its enhanced mobile portal. The new portal, available from 8 December 2009, will allow customers to access news, music, video and games, along with Yahoo!'s oneSearch internet search service.
Facebook has topped the search terms charts in 2008, it has emerged, followed by BBC and YouTube in second and third places. These were the three most popular search terms in the UK in 2008, according to Google tracking.
The nation's fastest-rising search term was iPlayer. The BBC's video and live web streaming service has reached the top spot in the Google rankings exactly one year after its official launch. The second and third most popular UK search terms were Facebook and iPhone.
Google has also provided details of the top 10 finance-related search terms in the UK in 2008. Icesave made the top spot, while Hot UK deals pipped NatWest to second place. Moneysavingexpert came in at number six.
The two industry heavyweights, Microsoft and Google, have fallen out over EU proposals to ensure search engine users can become completely anonymous after six months.
While Microsoft would like the industry to adopt a common standard for 'anonymisation' as set by EU privacy regulators, Google disagrees. The search engine giant, who has 80% of the European search market, recently moved to anonymise internet provider (IP) addresses after nine months, compared to its previous 18 months.
Microsoft, who has only a 2% share of the European search market, has said it will follow the EU proposals if the whole industry complies. But Google's Global Privacy Counsel, Peter Fleischer, said his company had not been made aware of Microsoft's conditional offer.
Microsoft would also like to see the entire IP address and all other cross-session identifiers removed. But Fleischer, who was recently appointed to a panel of five experts on the working party set up to update the EU's privacy rules, argues against this. He maintains that removing the last four digits of the address is sufficient.
Google added a new element to their tried-and-tested formula when they launched SearchWiki at the end of November. Users can now move specific results to the top of the page, add new sites, attach comments to sites and remove results they find irrelevant all on the SERP (search engine results page).
SearchWiki is available to signed-in Google users and the changes are stored in users' Google accounts. The changes only affect users' own results, but it is also possible to view search results that have been edited by the 'community'.
A Google spokesperson calls SearchWiki 'another step along the way' in improving the Google search experience. But sceptics anticipate problems with spamming and competitor abuse, with companies potentially using SearchWiki to direct users to their websites and leave disparaging remarks about their competitors' search results.
However, Cedric Dupont, SearchWiki Product Manager at Google, says: 'Spam, abusive and illegal comments can be reported by users and will be removed by Google.'
SearchWiki will allow the search engine giant to build up an even larger set of data on user behaviour, for example which results they rank and find most relevant.
First Google removed best practice funding, then they U-turned on gambling and lifted the ban on gambling ads targeted at the UK (see last month's article). Now the search engine giant is going easy on alcohol, too.
Google has announced that it will allow spirit companies to run branding campaigns in the UK from the second week of January 2009. However, it still won't allow direct response ads that promote actual sales. The global ban will not be lifted anywhere else.
A spokesperson for Google says: 'We're constantly evaluating our ad policies to ensure they are up-to-date and as consistent as possible with local business practices.'
But our take is that Google has started feeling the credit crunch. Granted, their market share is so large they won't be worrying about gaining any more of it. But the chances are Google is experiencing some concern about retaining their position of strength during the economic downturn.
After all, in Q4 advertisers have spent half of what they predicted and this pattern looks set to continue well into 2009. As such, it looks to us as if Google is re-opening channels such as gambling ads and alcohol brand activity in order to keep advertisers and stop them migrating to Yahoo! or MSN. Google wants to maintain a level of growth without being seen to charge advertisers directly. They are also incentivising advertisers by paying commission on video adverts, another revenue avenue to be explored.
We estimated back in November that revoking the ban on gambling ads would boost Google's profits by a minimum of £100 million. This latest move could be worth millions to Google, which all adds up to the idea that Google may be more affected by recent economic events than they'd care to admit.