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A recent comment on one of my posts about the Yahoo and Microsoft deal pointed out that the reduction in competition this would cause in display advertising required thought.

A good point - in hindsight, I did gloss over the significance of the share of the display advertising market Yahoo and Microsoft have. So to correct that...

Both companies offer display advertising across their networks of sites as well as on their email services and IM software. Yahoo strengthened their offering in these areas with the acquisition of BlueLithium http://www.bluelithium.com/press/2007090411.html%20in%20Autumn%202007. They both re-sell space on other sites, too.

Yahoo and MSN do have significant market shares in these areas - and when it comes to advertising on email services or on IM software they dominate through Hotmail, Live Messenger, Yahoo Mail and Yahoo Messenger. Google have little to offe the advertiser in comaprison. You can't buy advertising on Google Talk (which has a tiny market share) or on Google Mail alone. Ads on GMail are from the Google Adwords content network and are not a stand-alone buy.

So...let's imagine a world where Yahoo and Microsoft don't have search offerings. Would regulators allow Yahoo to be acquired by Redmond - and how would the industry react?

I think there would still be a case for an acquisition - because there are other sites with strong display advertising offerings. In the UK that includes ITV and Sky, AOL, ISPs, the social networking websites, ad networks, the newspapers and many other sites. In other countries MSN and Yahoo have different market shares and face other competitors - including the BBC.

Of course, none of the UK sites/networks individually have the reach to rival MSN or Yahoo. But there is AOL/CarphoneWarehouse/Talk-Talk, with its email service and IM software.

So, do I think it's important to remember that display advertising is an important factor in Microsoft's plans for Yahoo? *

Absolutely. Should the market shares of Yahoo and Microsoft in display, email and IM advertising stop the acquisition? No - there are other competitors in the fractured display advertising/email/IM space.

And I don't expect Google to not have their own plans for IM, email and display advertising beyond their current site targeting and content network offerings, which simply do not compare...yet.

If search is the start of the Micro-hoo story, display and mobile may be the next chapter...

Hat tip to AM for his thought-provoking comment.

*Not to mention Yahoo's mobile search, mobile application and mobile ad offerings.