Internet Marketing & SEO

Bebo Adds Yahoo as a Friend

Thursday, September 13th, 2007 | Internet News, Yahoo

Yahoo’s corporate culture is about caution and measured risks. And so it is perfectly in keeping with the way the company has been run that it announced today that it has been chosen to sell advertising in the United Kingdom and Ireland for Bebo, the most popular social network in Britain.

These days the competition to sell ads for big Web sites is a very dangerous game. Google right now can earn more selling ads on a given site than any of its rivals. It has better technology, more sites and more advertisers bidding, which creates a virtuous circle bidding up prices. The only way for Microsoft and Yahoo to break in is to build better advertising systems — which they are doing — and get bigger networks, which in turn will draw more advertisers.

Google knows that its rivals have an incentive to lose money on some big deals just to get scale, so it too has been overbidding to keep plum sites out of their hands. The biggest example was MySpace, where Google promised $900 million over three years, far more than it expected to earn, according to people involved in the negotiations. Microsoft, which has more cash than Fort Knox, later won the contract to sell ads on Facebook.

Yahoo looked at these deals, but just couldn’t face saying goodbye to so much money. It’s hard to imagine that the underlying economics are any different in the case of Bebo — I’m sure both Google and Microsoft would bid. The terms were not disclosed, but the scale is smaller, so what I assume will be a loss for Yahoo will be easier for it to swallow.

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