MONEY FROM WEBSITE

Now that the tech industry has had some time to digest the blockbuster ad deal that Yahoo signed with Google, numerous commentators have declared it a death knell for Yahoo's search-ad business.
The charge was that by giving Google a portion of its search ads, Yahoo was essentially admitting defeat, heading down a slippery slope that would see Google increasingly overtake its business.
But some say Google had already won the search game. Jim Lanzone, the former chief executive of Ask.com, argued that no industry realignment could break Google's commanding hold on the search market — so this deal doesn't do much to tilt the balance in its favor.
Instead, he thinks that this deal will give Yahoo some extra money to focus on building its audience without significantly eroding its own advertising business.
"The fears of mass loss of advertising by Yahoo is a little fear mongering," Lanzone said on a conference with J.P. Morgan analyst Imran Khan. "Sure, some advertisers will migrate away, but the ones that they have are there for a reason to start with."
Those are the advertisers with deep pockets, who Lanzone said will continue to make independent buys on the search pages of Google and Yahoo.
"Yahoo does very well with those advertisers," he said. "It's worth it to them to set up a campaign on both Yahoo and Google."
According to Lanzone, the real value of the deal for Yahoo is that it can still sell its own ads through the Panama platform, but then turn to Google for higher-yield ads or to backfill unsold inventory.
Yahoo expects the deal to produce $250 million to $450 million in operating cash flow in the first year.
"This to me is free money to Yahoo," Lanzone said.
On the publisher side, Lanzone declared there was a "zero percent chance" of the deal eroding the network of sites where Yahoo syndicates ads.
"I don't see this giving Google that much more power than it already has," he said.
In search advertising, volume is the differentiator. More advertisers vying for the same keywords drives up the bidding auctions, and Lanzone estimated that Google's network contained "a number in the hundreds of thousands" more than Yahoo's.
Yahoo's search engine, which comScore credits with a 20.4 percent market share, is driven largely by what Lanzone called "convenience search" because Yahoo places its search box atop each of its content pages.
Google, without the benefit of a content portal like Yahoo's, has 61.6 percent of the search market, according to comScore.
Lanzone said that the extra money Yahoo gains from the deal would be well spent building out its content network to increase its audience. Then, because of the deal's flexible structure, it will be able to shift its ad sales back to its own network if the numbers looked right.
"Yahoo gives up almost nothing," he said.
So to Lanzone, Yahoo is sitting pretty with a flexible ad deal that will provide it the extra money to build out its content network, which in turn could help strengthen its own search ad business.
But what about its former suitor, Microsoft, which had sought to beef up its own search ad prospects through a full or partial purchase of Yahoo?
"This is all about query volume, and they [Microsoft] don't have it," Lanzone said, calling Microsoft's road to a competitive search business "exponentially harder" than Yahoo's.
"They have a tough fight — a very, very tough fight," he added.
This article by Kenneth Corbin