Technology

Viacom Spurns Google for Yahoo


A new partnership gives the Web portal a leg up in its ongoing battle with Google for a bigger share of the online-advertising market

Yahoo! has new reason to holler, and it's at Google's expense. The Internet portal announced a multiyear deal with Viacom on Apr. 10 that gives it the exclusive ability to serve search and content-related text ads on almost three dozen Viacom Web sites. Viacom (VIA) and Yahoo (YHOO) also have the option of expanding the agreement to include all Viacom's properties—an additional 140 sites.

Representatives declined to disclose exactly how advertising revenue would be split between the two companies. But it's clear Yahoo stands to gain considerably from the relationship. Yahoo Chief Executive Terry Semel said in a statement that the alliance marks the beginning of a "powerful and engaging partnership."

PR Coup

Viacom is a powerful partner to have. Taken together, its Comedy Central, MTV Networks, and other digital properties make Viacom a top destination on the Web. In February, comScore Media Metrix put its traffic at 90 million unique viewers. Much of that traffic goes to Viacom's broadband properties such as Nickelodeon's Nick.com and ComedyCentral.com, each of which had upwards of 10 million individual visitors in March.

That's quite an audience to which to serve ads. UBS (UBS) analyst Ben Schachter believes the agreement is a "step toward Viacom achieving its 2007 digital revenue target of $500 million, expected to be driven primarily by Internet ad sales."

Aside from the revenue, the deal is a significant public relations coup for Yahoo. Viacom's partnership sends a signal to other advertisers that Yahoo's Panama marketing system, fully launched this year, capably matches content and search queries with the ads most likely to resonate with consumers (see BusinessWeek.com, 3/8/07, "Panama's Promising Early Results"). "Yahoo has made impressive strides with its new search marketing system," Viacom CEO Philippe Dauman said in a statement following announcement of the deal.

Google Snub?

If Panama weren't working, Viacom presumably wouldn't have picked Yahoo over rivals such as Microsoft (MSFT) and Google (GOOG), although Viacom didn't say which other parties jockeyed for the deal. It was Google that won the coveted agreement to serve ads on News Corp.'s (NWS) highly trafficked social network MySpace (see BusinessWeek.com, 8/8/06, "Google Gets Back into MySpace"). It was also Google that inked the search advertising deal with Time Warner's (TWX) AOL, reportedly snatching it from Microsoft. And of course it was Google that snagged YouTube and all the advertising rights that came with the $1.65 billion acquisition.

For a while there, it even seemed as though Google would end up with Viacom. Last year, Google struck an ad-revenue sharing agreement to syndicate Viacom video clips and appended commercials to its AdSense network (see BusinessWeek.com, 8/8/06, "Google's Duet with MTV"). However, negotiations between Viacom and Google concerning the upload of Viacom's copyrighted clips to YouTube appear to have strained their relationship past the breaking point. In March, Viacom sued Google for massive copyright infringement (see BusinessWeek.com, 3/14/07, "Viacom's Suit Won't Snuff Out YouTube").

Viacom wouldn't characterize the selection of Yahoo as a dig at Google. But Semel hinted that the copyright disagreement between Google and Viacom may have been an issue, noting in his statement that Viacom and Yahoo share a respect for "copyrights and other intellectual property rights at the same time."

Holahan is a writer for BusinessWeek.com in New York .

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