My competitor has one product that is not free and can’t be given away for free. This single product is so profitable that my competitor uses it to fund development of a copy of my main revenue driving product (that they give away for free) just to fuck with me.

My first business model is in a lot of danger. I already make some money from my competitor’s main market, but there aren’t a whole lot of my companies resources dedicated to that market and we spend a bunch of money on other random crazy shit.

My competitor is Google and my company is Microsoft (not really, its a story.)

Microsoft’s complete takeover of Yahoo search business is imminent. The organic listings have already transitioned and paid search results will come shortly.

Big problem for Microsoft, its not a seamless transition. Each Yahoo advertiser will need to manually move their campaigns from their Yahoo account in to Microsoft’s Bing Adcenter. Account limitations and set up on Yahoo are very different than Microsoft’s Adcenter. So different that some people are recommend you take your Google Adwords campaigns and migrate them to Bing! Guess what, a lot of advertisers will not be able to fully make the transition. Some will make it, but with a struggle. In the meantime, Microsoft is not going to make as much as they expect to (hopefully Yahoo got a flat rate guarantee.)

I feel bad for Microsoft. When big industries change, and they have poor leadership, your good employees go work for your competitors and make them better companies. The people that are left aren’t the visionaries. They may be bright, they may be sharp, but they weren’t sharp enough to see bigger opportunities for themselves, and they certainly won’t be able to take advantage of those opportunities for their employer.

I hope I’m wrong. Google needs strong competitors. It means a better environment for advertisers and stronger payouts for web publishers.

Update 10/30/10: Looks like I was right, to some degree. Yesterday Search Engine Roundtable reports on advertisers seeing a “major” drop in traffic in their Microsoft Adcenter accounts (which is how you buy advertising on Bing.) I can confirm this first hand as its happened to us as well.

What I reported in this post earlier was an early sign, to me, of potential problems. While they finally did come out with an account migration its likely that this transition was not well prepared. That is not a good sign for Yahoo or Microsoft shareholders.

I just opened this e-mail today from Yahoo called the “Ultimate Connection Contest.” The prize includes $25,000 of Yahoo Search Marketing credits (pretty cool.) Oddly it also includes “An executive meeting with Ivanka Trump.”

For those of you who haven’t seen The Apprentice here in the states, Ivanka Trump is Donald Trump’s daughter. I looked at her bio on wikipedia and I saw nothing about pay per click marketing. I see things about her being a model, making television appearances, being on The Apprentice with her father, and getting a bacheler of science in economics. Perhaps Yahoo should replace her with someone like Jeremy Shoemaker or Aaron Wall? Just a suggestion.

If you are interested in the $25,000, check out this link.

I have been really busy since returning from New York, so I have not had a chance to test the new AOL Search Marketplace yet. At Search Engine Strategies Yahoo had a booth and did a drawing for a free Mini Cooper to promote it. I was suprised to have heard nothing of it before this (may be I am living in a shell, but I read quite a few blogs.)

Previously, Adwords ads were syndicated through AOL.com. You really did not have an option whether to target them specifically or exclude them. So whats the big deal here? The deal is, in my experience, AOL has exceptionally strong conversions. In other words, you can now target AOL specifically and make bids based on AOL.com conversion data. Previously you were, in effect, bidding on a “pile” of traffic with AOL included. This may even allow you to drop your Adwords bids to make up for fewer conversions.

AOL Search Marketplace uses Google Adwords technology behind it. Officially, its a Adwords white labelled solution. This means you won’t be using a buggy and/or crippled piece of garbage like MSN and Yahoo have been in the past.

Add this to your list of high quality PPC traffic sources: Google, Yahoo, MSN, and now AOL. On the downside, it does not appear to be publicly available yet. They probably want to give eBay and Amazon a chance before getting bombarded by ringtone affiliates.

Another short post — Graywolf has wants to know why his blog has a poorer quality score for his own name than Matt Cutts, Dave Pasternack, Jason Calacanis, and Ted Leonsis. In his own words “So basically what’s happening is because I have a more common name than any of the people above, and there are other more “famous” Michael Gray’s I’m less important, relatively speaking, and forced to pay more for a keyword I that more accurately describes me than one which doesn’t.”

Graywolf isn’t the only one closely watching the Adwords quality score, so are the guys over at pepperjam.

Lets face it, SEO has a growing rival cousin — PPCO. This is hardly new either, do a search for “pay per click optimization” in Google and you should see at least 7 relevant advertisers. The difference is in the past it was all about return-on-investment and bid placement management. Increasingly, quality score optimization is going to take center stage.

The glass isn’t half empty — this is good news for obsessive online promoters and affiliate marketers. The barrier to entry is being raised and the money will soon follow.

Adwords advertisers have been had two reactions to Google’s quality score — beat it, run for the hills, or crank up the spending.

With Google’s announcement today of profits nearly tripling over the past year, raking in $1.03 billion in the last quarter alone, cynical ad buyers have to be wondering if the playing field is being artificially skewed solely to boost short term profits.

A technique regularly used on eBay, in auction houses, at car auctions, and so on, is shill bidding. Shill bidding occurs when someone with an interest in the sale bids simply to inflate the price. Crowd psychology makes this technique quite effective.

Wouldn’t it be nice if Google and Yahoo could use shill bidding to hyper-inflate their profits? The problem is its illegal. However, with a completely opaque bid system, why not?

The answer — why break the law when you don’t have to? While Google’s quality score has a noble purpose, the lack of straightforwardness leaves me wondering. Would they improve their user experience if it killed their revenue and margins?

Yahoo is about to jump on board too. On February 5th Yahoo is rolling out its new ranking system which factors in “bid amount and ad quality.” Despite a 61% profit crash, you might want to consider buying their stock.