Google, Yahoo! Step Up Search-Deal Defense

SearchIgnite, a search marketing technology firm, conducted an analysis of Yahoo!'s cost per click for running the same keyword for the same advertiser in the same position on the page as Google. It found that advertising on Google cost more than advertising on Yahoo!.

More important, SearchIgnite maintained that the differential could sway keyword prices on Yahoo! , pushing them up by 22% once the agreement is carried out, assuming that Yahoo! pursues a profit maximization strategy.

Google disputed SearchIgnite's findings, arguing the firm made some flawed assumptions.

"First, the report fails to acknowledge that ad prices are not set by Yahoo! or Google, but by advertisers themselves, through the auction process," the company said on its site. "The report also mistakenly claims that for any given keyword, Yahoo! will have the ability to see whose ads are priced higher - Yahoo!'s or Google's - and then decide which ads to serve.

"Finally, the report mistakenly assumes that Yahoo! will serve Google ads for as many of its search queries as possible, contradicting Yahoo!'s own statements to the contrary."

On Yahoo!'s blog, Decker argued that the monetization gap between Google and Yahoo! "is in reality a value gap. Where Google is getting higher bids than Yahoo! today, this is because advertisers perceive that Google is delivering more value -- more targeted leads, more clicks and more conversions."

She further asserted that by using Google ads in some instances, Yahoo! can backfill search-result pages where the company hasn't generated ads on its own.