Google Challenges Report of Increased Costs from Google-Yahoo Partnership

In a post on the Google Public Policy Blog, Google’s Chief Economist Hal Varian challenged the findings of a report by SearchIgnite that Google-Yahoo search advertising partnership would cost advertisers more. Varian say that the report is flawed because only looks at the cost of clicks and not the performance of those clicks. He says that “we believe that advertisers will be getting significantly better performance at prices that reflect that improved performance” He goes on to say that neither Yahoo! or Google will be able to see the current auction prices, so Yahoo! no the have the ability to choose the ads with the higher price. He also said that because Yahoo! receives all the revenue for their own ads and only part of the revenue from Google ads, Yahoo! has a strong economic interest to serve their own ads. Finally, he claims that advertisers receive a higher return on investment for clicks on Google ads because they are “highly relevant to user queries” and that “we anticipate that our agreement with Yahoo! will bring more relevant ads to Yahoo! users” which would increase the return on investment.

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