Microsoft, AOL, and Yahoo! have confirmed they are to team up, selling online display ads on each other’s networks, in a bid to take on Google and Facebook in the online ad sector.
The deal will see the three firms maintain separate sales teams and compete against each other in other areas.
The partnership is non-exclusive and therefore outside the scope of regulatory action.
“Enhancing choice and scale in today’s display advertising market is ‘a rising tide that lifts all boats’,” said Microsoft Corporate Vice President Rik van der Kooi. “This partnership will create an opportunity where advertisers and publishers alike can benefit from easier access to—and demand for—high-quality inventory. The fact that we’re joining together to offer this kind of access to quality—yet each with our own differentiated ad offerings—is something that will benefit the market as a whole.”
According to the terms of the agreement, ad sales teams from Microsoft, AOL, and Yahoo! can offer each other’s “premium non-reserved online display inventory” to their respective customers.
This will allow advertisers to choose to use any combination of each of the companies’ ad networks, each of which offers some advantages over the others. For example, Microsoft points out that its ad network is differentiated by ‘its data, optimization, packaging, and inventory capabilities’.
This reworking of the online ad market was necessitated by the rise of two competitors, Facebook and Google. The dominant social network, Facebook rose out of nowhere to command 16 percent of the online ad market this year, making it the single most popular online destination for ads. Google is number three, with 9 percent of the market, but it commanded only 2 percent three years ago and is growing rapidly.
The three partners together represent about 22 percent, which gives them a larger online presence than the competition.
But looked at separately, in the US ad market these companies—Yahoo! (13 percent, but falling rapidly), Microsoft (5 percent), and AOL (4 percent)—are less lucrative to advertisers. The division responsible for Microsoft’s ad business has never turned a profit.
