AOL started selling AdWords directly. AOL's higher than average conversion rate has been subsidizing bid prices for many shady search partners. Vinny Lingham posted how this deal may help marketers and hurt smaller and/or shady syndication partners.
By AOL moving out of the marketplace, this would effectively mean that the remaining traffic would become too expensive, because AOL would not be cross subsidizing it (and obviously, they know this already, and that’s why they want their own marketplace). This would mean that prices would drop in order to offset the drop in traffic quality. ...
I think this is a great move by Google and I applaud them. They’ve thrown the gauntlet down to the other search engines, and let’s see how they respond!
Syndication revenues are much larger than most people realize. Frank Schilling recently stated:
Last week I heard a colleague in banking estimate that 1/3 of Yahoo's revenues come from the domain channel (Arbitrageurs included in that channel BTW).
Is Yahoo! be willing to risk that income?