Cable network Viacom and Internet giant Yahoo! Inc announced Tuesday that they’re forming an exclusive, multi-year partnership that will make Yahoo the sole purveyer of contextual advertising on Viacom’s portfolio of high profile, highly trafficked websites. The deal shuts out Google Adsense, the current industry leader in contextual Internet advertising revenue.
Viacom recently sued Google for $1 billion, claiming substantial damages for copyright infringement after YouTube (which Google owns) hosted a wide range of video clips taken from programs produced by Viacom.
Yahoo CEO and Chairman Terry Semel implied that the lawsuit was a motivating factor in Viacom’s decision to choose Yahoo advertising over Google Adsense, telling reporters that “Viacom shares Yahoo’s commitment to connecting users to the content, products, and services for which they are looking while respecting copyrights and other intellectual property rights at the same time.”
The partnership between Viacom and Yahoo may have been formed in response to Monday’s announcement of a similarly exclusive advertising partnership between Google and Time Warner/AOL. As part of that joint venture, AOL plans to launch a for-pay search service that incorporates technology developed by Google in order to bring personalized, targeted search results to consumers. It is also expected that Google Video will begin to prominently feature content created by AOL/Time Warner.
Unlike the Google/Time Warner partnership, the Viacom/Yahoo will only affect advertising and sponsored search capabilities, not the primary informational content on any Viacom sites.
The Viacom/Yahoo partnership is set to cover 33 of Viacom’s most popular websites. A large percentage of Viacom’s sites create an online presence for television networks, and the jewels in the Viacom online crown include MTV.com, Nickelodeon.com, VH1.com, ComedyCentral.com, and BET.com. Viacom currently owns 140 websites, including many devoted to international television channels, but the initial phase of the Viacom/Yahoo partnership will only apply to a select group of Viacom’s online holdings.
The Yahoo contextual ad platform “Panama” is set to provide the technological foundation for the advertising on the Viacom sites. Panama differs from Adsense in several key ways: the most fundamental difference is that while Google simply offers the top spot to the highest bidder, Panama ranks ad placement not just by the amount advertisers pay, but also by the quality of the ad, an attempt to ensure that the ads are useful to consumers as well as contextually keyword appropriate.
Viacom President and CEO Phillippe Dauman told reporters that he felt very positive about the deal with Yahoo, saying “We couldn’t be more pleased to have them as a partner, and we look forward to growing our relationship even more over time.”
However, not all stockholders were as immediately enthusiastic, and Yahoo stocks fell 1% within a day of the deal. Financial analyst Gene Munster may have captured the feelings of many in the marketplace when stating that “The deal likely says more about Viacom’s fight with Google than the strength of Yahoo.”