Peter Kafka

Recent Posts by Peter Kafka

All for One! Yahoo, AOL, Microsoft Band Together for Ad Plan.

AOL, Yahoo and Microsoft compete for ad dollars. But a new pact calls for the rivals to cooperate on ad sales, too.

The three companies are going to start selling ad inventory on each others’ sites, in a plan they hope will make them more competitive with Google.

The strategy is also designed to help them claw back some ad spending that has ended up in the hands of ad networks in recent years.

Executives from all three companies briefed a group of top Web publishers and ad buyers about the plan at a dinner presentation last night in Manhattan. AOL, Yahoo and Microsoft hope to convince big Web properties to share some of their ad inventory as well, and to get big ad holding companies to funnel some of their purchases through the consortium.

The idea, according to people who attended the meeting: Microsoft, Yahoo and AOL have agreed to sell each other’s “Class 2 display” inventory — graphic ads the companies can’t sell on their own and would normally hand over to ad networks.

The theory is that if, say, AOL has a big order for a certain kind of ad impressions, it will fill it with its own inventory as well as with what’s available from Microsoft and Yahoo.

The three companies will share revenue on the ads, and supposedly they’ll pocket more than they would have if a third-party ad network sold their stuff. It’s up to each of the three companies to figure out how to convince their own sales teams to sell their competitors’ inventory.

The plan, which is supposed to start up by the end of this year, doesn’t require exclusivity from any of the players. And it doesn’t prevent any consortium member from working with any ad network, ad tech company or even Google.

But it’s clearly targeted at all of those groups, and Google in particular. Google has made almost all of its money in search ads, but has been moving aggressively into display ads in the last few years, and recently unseated Yahoo as the biggest display ad player in the U.S.

The plan has strong echoes of arrangements other publishers have tried before. In 2009, News Corp. digital boss Jon Miller spent time trying to assemble a similar coalition of big Web players, including the three leading the new consortium. (News Corp. also owns this Web site.)

The plan is also similar to 5to1, a start-up that wanted to build “an online advertising alliance consisting exclusively of major media publishers.” Yahoo purchased the company in May, and Yahoo Americas head Ross Levinsohn put 5to1 CEO Jim Heckman to work on replicating the strategy at his new employer.

Levinsohn pitched the plan on behalf of Yahoo at last night’s dinner meeting, say people who attended; AOL CEO Tim Armstrong attended as well, though his newish ad boss Ned Brody presented for his company. Microsoft advertising COO Dave O’Hara represented Redmond.

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work