UPDATED 10:06 EDT / SEPTEMBER 14 2011

Yahoo, AOL Rely on Microsoft for Ad Deal

Yahoo and AOL are losing to Facebook and Google in online advertising, and it is projected that by the end of this year, online advertising on Yahoo’s network will drop 11% from 16.1% in 2009, and AOL 2.7% from 4.4% in 2009.   Microsoft, on the other hand, isn’t doing too shabby in online advertising, as a matter of fact, they are updating their Atlas offering as part of the $6 billion AQuantive deal but this didn’t stop them from teaming up with Yahoo! and AOL for a new ad strategy.

As reported on AllThingsD, the trio entered an advertising deal that sums up to the selling each other’s “Class 2 display” inventory or graphic ads the companies can’t sell on their own, and would normally hand over to ad networks.  The deal was made to gain back revenue lost from ad networks and other ad platforms like Facebook and Google.  But this doesn’t mean that they are exclusively tied to each other.  They can still utilize ad networks or other ad platforms.

According to Peter Kafka, “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 what’s available from Microsoft and Yahoo.”

The deal was announced at last night’s dinner meeting at Manhattan attended by representatives from the three companies as well as a group of top Web publishers and ad buyers who they pitched their plan to.

The idea for the team p came from the startup 5to1, which Yahoo purchased, that wanted to build “an online advertising alliance consisting exclusively of major media publishers.”

Yahoo and Ganett Co. are also expanding their local advertising alliance to cover all of Ganett’s 19 broadcast markets nationwide.  Ganett’s TV stations and newspaper sites package Yahoo ad space with their own online inventory using Yahoo’s APT platform to deliver targeted display advertising.  At the same time, Gannett provides editorial content across Yahoo properties, including the home page.

AOL’s Project Devil is a new ad that will be four times bigger than their current inventory and will feature space for a photo gallery, a video, coupons, Facebook or Twitter updates or maps, and some ads will also be enabled with a 3D product viewing option, with click-to-buy functionality.   But the new ad format already hit a bump, as advertisers love Project Devil but are hesitant to invest in something that can only be used in AOL.

“…advertisers…are reluctant to spend money building out a custom ad that only runs on AOL,” said David Cohen, global digital officer at the ad agency UM. He added that he is a big advocate and partner of AOL and its efforts.

Microsoft’s remained an attractive partner as it gains in search and advertising, and Yahoo’s keeping its ties strong, even after turning down Microsoft’s $45 billion offering back in 2008. The two have teamed up on search as well, a deal that was solidified early last year. For the flailing Yahoo and AOL, there are more important things to focus on, like toppling Google and Facebook in the ad field.


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