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AOL, Yahoo and Microsoft Reportedly in Ad Deal

Tanzina Vega|The New York Times
Thursday, 15 Sep 2011 | 11:10 AM ET

Yahoo, AOL and Microsoft, three major technology companies that have traditionally competed for digital advertising revenue, have created an unusual partnership in which they will sell ads for one another.

The move represents an effort to challenge Google, which dominates the search advertising market and has increased its efforts in display advertising.

The plan was discussed at a private meeting in Manhattan on Tuesday night among officials from the three companies and executives from the advertising industry, according to an agency executive who attended but who would speak only anonymously because the meeting was private. AOL, Yahoo and Microsoft declined to comment on the plan.

The companies also hope to entice other online publishers to join their partnership. And by joining together and selling for one another, they hope to reduce the need for third-party ad networks that often sell some of the less desirable ad space on their sites.

The plan was first reported Wednesday morning on AllThingsD, the technology Web site. The report said the deal was focused on selling remnant inventory, or the lower-priced ads that typically run at the bottom of Web pages or on secondary pages. Remnant ads are generally sold by third-party networks, usually for lower prices, and feature products or services like weight-loss or teeth-whitening treatments.

The move would signal another step by online publishers to rely more heavily on so-called private exchange technology, which allows them to deal directly with ad agencies without having to use third-party networks. Selling the space could allow the publishers to earn more revenue and gain more control over the data they collect on their users. It would also give media buyers and agencies a one-stop shop for buying advertising space on each of the three companies’ sites.

“What they are trying to replicate is the growth of private exchanges,” said David Hallerman, a principal analyst for eMarketer, a digital market research firm. The exchanges, he said, “offer a buyer accurate targeting, brand safety and good pricing for good reach.”

The companies’ plan would most likely require them to overcome several obstacles. The technologies they use to sell and place ads on their sites are not immediately compatible. Yahoo has an ad exchange called Right Media, and AOL has Advertising.com, which makes much of its revenue from selling remnant ads. Last winter, Microsoft began selling remnant ads through AppNexus’s exchange.

Other issues could include figuring out how to coordinate sales efforts and determining which sales team sells which ad space.

Google dominates the search advertising marketplace, with nearly 76 percent market share, according to data from eMarketer, and the company is aggressively pushing into online display advertising as well. It accounts for about 9 percent market share in display, with projected revenue of about $1.1 billion, according to eMarketer. The projected display advertising revenues for Yahoo , AOL and Microsoft combined would total $2.7 billion, eMarketer reported.

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