AOL, Yahoo and Microsoft tie up for display advertising

The deal will let the companies sell each other's non-reserved display ad inventory

Yahoo, AOL and Microsoft have partnered to pool their display ad inventories and integrate their sales platforms so that they can offer each other's ads.

The idea is to increase sales and margins for all three companies by making the process of buying and selling non-reserved display ads simpler and more convenient for marketers and publishers.

The deal is expected to go into effect in early 2012, once the companies have integrated their real-time bidding systems, Yahoo Network Plus, AOL's Advertising.com and the Microsoft Media Network.

Initially, the combined inventory will be available in the Microsoft and Yahoo exchanges, while AOL will decide later whether to use its own exchange, the companies said on Tuesday.

The deal will be in effect in the U.S., while Yahoo and AOL will also extend their partnership to Canada.

"At the highest level, it's hard to argue against the benefits of added choice, increased scale and greater transparency, all of which this deal is going to deliver," said Rik van der Kooi, corporate vice president of the Microsoft Advertising Business Group, during a conference call.

AOL's Advertising.com already has partnerships with Yahoo and Microsoft, but this initiative deepens those relationships, said Ned Brody, AOL's chief revenue officer.

Noticeably absent from the partnership are Google and Facebook, both of which have made significant strides in the display advertising market, where AOL, Yahoo and Microsoft historically were the main players, in the days when Web portals ruled online advertising.

However, search advertising, dominated by Google, has represented the bigger segment of the online ad market for several years, and AOL, Yahoo and Microsoft have struggled to compete. Yahoo and Microsoft have a search partnership but it isn't yielding the expected results.

Moreover, this year Yahoo ran into trouble in its traditionally strong U.S. online display market, and AOL has in recent years trailed industry online ad growth rates.

Asked whether Facebook and Google would be allowed to join, officials suggested that neither has enough "high-quality" premium display inventory to fit with the focus of the partnership.

The three companies said they will continue to compete aggressively for sales and for publisher partnerships, and thus don't expect regulators to object to the deal on antitrust grounds.

The deal focuses on non-reserved ad inventory, which is ad space on websites that marketers buy in an auction-style process in ad networks and exchanges. By contrast, marketers who purchase reserved ad inventory pay a premium for specific placement, at particular times and at a defined frequency.

Juan Carlos Perez covers search, social media, online advertising, e-commerce, web application development, enterprise cloud collaboration suites and general technology breaking news for The IDG News Service. Follow Juan on Twitter at @JuanCPerezIDG.

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