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AOL, Microsoft and Yahoo! Join Forces for Online Display Advertising

Trading on the old adage that the whole is greater than the sum of its parts, AOL, Microsoft and Yahoo! this week formed an alliance that they hope will help them sell premium online display advertising—and perhaps take on Google.

Under the agreement, the three companies will offer each other's premium nonreserved online display inventory to their respective advertising customers. They plan to integrate their real-time bidding (RTB) technologies to facilitate the process and said they expect to have the system in place by early 2012.

"Enhancing choice and scale in today's display advertising market is a 'rising tide that lifts all boats'," said Rik van der Kooi, corporate vice president of the Microsoft Advertising Business Group. "This partnership will create an opportunity where advertisers and publishers alike can benefit from easier access to—and demand for—high quality inventory. The fact that we're joining together to offer this kind of access to quality—yet each with our own differentiated ad offerings—is something that will benefit the market as a whole."

The companies said the Microsoft (NASDAQ:MSFT) Advertising Exchange and Yahoo! (NASDAQ:YHOO) Right Media Exchange will form the initial marketplaces for the partners to procure inventory for resale to advertisers and agencies. AOL (NYSE:AOL) said it might later add its own exchange solution after the partnership gets off the ground.

"We're thrilled to partner with Microsoft and AOL to bring to market what we believe will be a more efficient, effective and more effortless way to access true premium inventory and formats," said Ross Levinsohn, Yahoo! executive vice president Americas. "There has been a significant shift in how inventory is bought and sold, and we're now 100 percent focused on controlling our own destiny, working directly with marketers and agencies and driving better returns for our advertising partners."

The alliance may be aimed at giving the three partners room to compete with Google (NASDAQ:GOOG), which remains the 800 lbs. gorilla in the online advertising space.

Research firm comScore released its October 2011 US Search Engine Rankings Friday, which showed that Google sites represented 65.6 percent of explicit core searches in the US in October. The comScore (NASDAQ:SCOR) explicit core search metric excludes contextually driven searches that do not reflect specific user intent to interact with the search results. In comparison, Yahoo! sites represented 15.2 percent of explicit core searches, Microsoft sites represented 14.8 percent and AOL represented 1.5 percent. In other words, Google's share was slightly more than twice the combined share of the three partners.

The three partners said that agencies and advertisers can still choose to partner across Yahoo! Network Plus, AOL's Advertising.com and the Microsoft Media Network, but the partnership will create increased efficiency in buying premium display inventory at scale. They also said the partnership should enhance the demand and value of their respective display advertising offerings.

"We are excited to be part of this partnership," said Ned Brody, chief revenue officer, AOL. "Today's announcement sets in motion the opportunity for advertisers to achieve scaled solutions across premium publishers. This should reduce friction in the marketplace, which will benefit both advertisers and publishers."

Thor Olavsrud is a contributor to <a href="http://www.internetnews.com">InternetNews.com</a>, the news service of <a href="http://www.internet.com">Internet.com</a>, the network for technology professionals.