Microsoft, AOL, and Yahoo form alliance as the display market shifts again

Microsoft, Yahoo, and America Online (AOL) have formed a strategic alliance in the premium display ad market in the US, facing off against the growing power of both Google and Facebook. Analysts say the model could also take hold in Asia.

The deal allows each of the partners to sell each other's unsold display advertising inventory to their own customers. It will kick in from next year.

"The partnership should enhance the demand for and value of each party's display advertising offerings as well as provide better yield for both participating publishers and advertisers," the companies said in a joint statement. Ross Levinsohn, Yahoo's executive vice president for the Americas, added that the partnership would lead to "a more efficient, effective and more effortless way to access true premium inventory."

The alliance comes in response to the growing dominance of both Google and Facebook in what has become one of the most lucrative markets in the digital advertising sphere.

According to figures from eMarketer, Facebook now has a 16 percent share of the US online ad market. Google has nine per cent. Yahoo remains ahead of Google with 13 percent, but its influence has been declining in recent years.

Microsoft has a five per cent share, while AOL holds four per cent of the market.

Arun Kumar, head of digital at Mediabrands, says the alliance is a logical response to those figures and the growing strength of Facebook and Google.

"Everyone's thinking about how best to monetise their inventory," he tells Campaign. But real-time bidding systems and demand-side platforms are revealing that advertisers are flocking to the larger networks and search engines. "If you want true optimisation, yoiu need access to a huge amount of inventory," Kumar adds.

Of the partnership, he is confident the three partners can make an impact on the status quo, while also remaining competitive in terms of service and price. They have the "power of three networks," he said.  In particular, he notes that the alliance works with the technology side only and there has been no attempt to integrate the three companies.

"Challenges start happening when organisations try to merge (at the front end)," he said.

While the alliance is centred purely on the US market, Kumar notes that similar alliances may soon be a flavour of other markets around the world. "Can it happen in Asia? Yes it can," he said, although he pointed out that different players were likely to merge their networks in regional markets here.

"When demand-side platforms prove their value for advertisers here, you'll see more tie-ups," he said.

This article first appeared on Campaign Asia-Pacific