Yahoo Acquires Right Media April 30, 2007
Posted by Bill in Auction-based media, exchanges, Google, Online Advertising, online marketing, Right Media, Yahoo Search Marketing.2 comments
Fun days here at Right Media… I have been incredibly impressed with Yahoo!s strategic vision and commitment to the exchange model through the process. I think this will be a great marriage. More importantly, it makes the competition with GoogleClick that much more exciting!
Official Press Release: Yahoo! Announces Agreement to Acquire Right Media, Largest Emerging Online Advertising Exchange
New York Times: Yahoo to Buy Ad Company in Bid to Compete With Google
Some excerpts from the above New York Times article, by MIGUEL HELFT:
– “The acquisition, to us, is a key step toward executing our long-term vision to build the leading advertising and publisher ecosystem both on and off the Yahoo network,” Terry S. Semel, Yahoo’s chief executive, said in an interview. The deal is to be announced today and is expected to close in three months.
– Right Media, a four-year-old company, runs an exchange in which advertisers and publishers buy and sell online ad placements in real time through an auction system. DoubleClick, which specializes in serving ads on Web sites, announced recently that it would develop a similar type of exchange. Online publishers are increasingly turning to exchanges like these to sell ad space on their sites.
– “What we look forward to do as an owner is put more inventory into that pot to help create a more vibrant exchange and create better pricing for everyone,” Mr. Semel said.
– Yahoo said that after the acquisition it would increase its participation in the exchange as both a buyer and seller of ads. The company said it planned eventually to sell all the nonpremium ad space on Yahoo through the exchange, a move executives said would enhance revenue.
– Google and Yahoo each dominate one segment of the online advertising market. Google is best at selling text ads that appear alongside search results and on other Web sites. Yahoo, which has lagged Google in search, is a leader in selling graphical ads, mostly on its own sites.
– By buying Right Media, analysts have said, Yahoo would accelerate its own efforts to sell and broker ads on other sites. Those efforts began taking shape recently, after Yahoo reached agreements to sell ads on eBay and on some 264 newspaper Web sites.
(Note: For the math impaired, $680 million for the remaining 80% that Yahoo! didn’t yet own is equal to an $850 million in total valuation…)
Yahoo Talks More About Panama January 29, 2007
Posted by Bill in online marketing, Search Marketing, Yahoo Search Marketing.add a comment
LAST WEEK’S WALL STREET Journal ran a piece on how Yahoo advertisers are faring as they migrate to the new Panama ad platform. I wanted to give Yahoo the opportunity to talk about the migration in its own words. What follows is my interview with Yahoo’s Senior Vice President of Advertiser Products and Platform, Steve Mitgang.
How do you think Panama will impact the Yahoo advertiser and searcher customer experience?
The focus of our old system was pay for placement. After you met the basics for editorial relevance, you’d be in the top spot if you paid enough money. That didn’t always lead to the most relevant search listings.
With Panama, the heart of the system is about making the most relevant connection between searchers and advertisers. We’re rewarding ads based on relevancy factors, like click-through rate. All things being equal, better ads get better click-through rates; so we’re incentivizing advertisers to focus on the quality of the ad message, and not simply on the bid price.
Meanwhile, our old system didn’t allow for enough testing. But in our new system, advertisers give us multiple creatives, which we rotate to see which has the most impact. So we have more quality ads to choose from, and ultimately more relevant listings for our searchers.
Everyone wins. Searchers see more relevant ads. As searchers see relevant ads, advertisers get more click traffic. Publishers on our content network get more clicks as well. And Yahoo gets greater revenue through our advertisers’ success.
How do you think the Panama migration is going?
I’d say it’s going extremely well. We’re well ahead of schedule on migrations, with tens of thousands of advertisers using the new system today. And call center volume is below expected, which means that people are pleased.
Of course, every company has customers with concerns, whether you’re talking about Apple, Nike, Microsoft — or yes, even Yahoo. When concerns come up, the most important things for us is to let the customer know how we can help, or that solutions are coming that will satisfy their needs.
One common challenge we’ve faced is the customers with very specific needs — customers with unique set-ups that really depart from the norm. Our No. 1 goal is to help them with whatever issue they have as the migration proceeds.
What has Yahoo done to educate advertisers about the migration?
We set out months and months ago to create the best migration possible for our advertisers. We talked to advertisers of all shapes and sizes — both to educate them, and to understand how to best educate them further as the migration progressed. We have provided every type of communication — brochures, e-mails, tutorials, letters, live seminars, webinars, and we placed our customer service numbers prominently.
Everything has been built from the customer perspective, and we’re working to make sure we get in front of advertisers so they know what’s coming, how to deal with change, and how to get help if they need help.
What do you think could have been done better to prepare advertisers for Panama, or to help them along the way as the migration proceeds?
The only thing we could have used is more time. A few days or a few weeks later gives you more cycles [of preparation], and would give you another opportunity to catch that bug or to prepare just a bit more — not just preparing the application, but readying the customer service side as well.
But all in all, we’ve done very, very well for an extremely complicated and complex job. And you can see that success in our low call volume to our help centers.
How far do you think Panama will go in helping Yahoo with its corporate challenges?
Like I said earlier, by giving the searcher a better experience, we’re also helping Yahoo’s bottom line. Panama will help everyone monetize better — the advertisers, the publishers, and Yahoo.
Beyond that, this is a platform we can iterate on. Our old platform was from 1998, and was built by a startup. It ended up becoming very popular, but it wasn’t designed to be what it eventually became. Panama is built with the future in mind: it isn’t just for 2007 — it’s for how digital marketing will evolve in the future. We’ve made it so it can be upgraded very fast, which means any new additions can be rolled out quickly, to better help all of Yahoo’s digital advertisers.
So Panama won’t just be for search ads?
We designed Panama not only around text and search listings, but around all kinds of digital advertising — including rich media, mobile, etc. We made it an ad platform, not just search platform.
Will there be offline ads through Panama as well?
I suppose that in theory, Panama’s ad configuration model could work for any type of ad. But for now, our goal is to be the first buy for advertisers in the digital world.
The Bubble Bath December 28, 2006
Posted by Bill in Google, MSN Search, online marketing, Search Marketing, traditional advertising, Yahoo Search Marketing.add a comment
For SEMs and online advertisers, 2006 was a bubble bath. The tone was set at the end of 2005, when Google paid $1 billion for a 5% stake in AOL. That put AOL’s total value at $20 billion, or $1,000 per subscriber. Later this year, Google paid $1.65 billion in its well-publicized acquisition of YouTube, a company with sixty-five employees, no profit model, and a bevy of illegally copied material (complete with litigious owners waiting in the wings). But perhaps the biggest of them all, the granddaddy of all bubbles, is Google’s stock price itself, which at press time was hovering at a 57.85 P/E ratio. Indeed, analysts are also finally starting to catch on to Google’s hugely overvalued stock. Into this mess splashed an acquisition that finally made business sense: the Publicis Groupe’s plan to buy Digitas.
True, Publicis did offer Digitas shareholders a 25% premium over the closing price when the deal was announced, but this reflects actual upside, rather than perceived upside. As search marketers we’ve seen firsthand for years how advertisers have shifted their spend from offline into search and other online media. As the general public has spent more time consuming media online, advertisers have realized that the accountability of an online campaign greatly surpasses that of a traditional campaign. Overall advertising is growing at 4-5% per year, while digital advertising is growing at 30%. That statistic alone justifies the 25% premium that Publicis paid for Digitas.
The next step for advertisers is applying the highly touted accountability of online media to their offline campaigns. This requires the keen analytics and robust technology typically found in digital agencies, and notably absent from traditional agencies. These capabilities include measuring spikes in search behavior and traffic in response to TV, print, and outdoor ads. An agency that specializes in all media, both online and off, will be able to execute on initiatives like boosting bids on keywords mentioned in TV commercials, and building microsites as landing pages where consumers can easily read more info and purchase the product they saw on TV. This integration poses another huge advantage for Publicis’ clients, as they will not have to coordinate between two separate agencies. These factors further justify the 25% premium.
It’s always risky to speculate on the future, but there are certain outcomes that almost certainly will occur in some form or other. “Convergence” has been a hot buzzword in the industry, the idea being that users will take control of their TVs in the same way that they’ve taken control of online content. This, in theory will enable advertisers to target video ads behaviorally, demographically, and by keyword. But this theory presumes that TV will still be the only device used to consume video. In reality, perhaps “divergence” is a better word, because media will be consumed not just on TV, but on computers, mobile phones, mobile e-mail devices, MP3 players, and in cars.
Keeping track of and optimizing each ad’s performance, across a diverse user base with a diverse media-consumption device base, all while deploying targeting options and other optimization techniques, will require an even more advanced technology and even sharper analytics. A digital advertising firm is far better positioned to deliver these assets to clients than an offline media firm. This is perhaps the most insightful element of Publicis’s move, and even further justifies that extra 25%.
Much has been made of Digitas’ client relationships having real value, but in reality, the Publicis Groupe and the other offline advertising giants don’t need to buy client relationships. They’ve had clients’ trust for years. What they need are the technology and analytics to deliver a full suite of advertising options to all of their clients, with greater accountability and the ability to scale as technology advances. That’s the real value that Digitas brings to the table.
Holding companies should not be focused on buying aQuantive or paying a premium for client relationships. Rather, they need to focus on acquiring smaller, privately held companies that have built leading-edge technology platforms, embraced a culture where the statistician is just as important as the creative director, and with whom they can bring their pre-existing customers to the digital upsell.
What a refreshing note to the end of 2006. Just when we all thought the bubbles were rising over the rim of the tub, here’s a move that will allow all parties to soak in real, not imagined, value.
The Genius of Yahoo’s Reorg December 11, 2006
Posted by Bill in online marketing, Search Marketing, Yahoo Search Marketing.add a comment
Last week’s announcement of a Yahoo reorganization wasn’t necessarily a surprise. Yahoo’s been hurting for a while now; and some kind of streamlining has appeared inevitable–especially after Senior Vice President of Communications Brad Garlinghouse came out with his “Peanut Butter Manifesto,” in which he complained that Yahoo is spreading itself thin, like peanut butter on toast. What’s surprising and delightful is just how smart Yahoo’s reorg actually is.
The basic idea of the new structure is that Yahoo, which even by insider accounts has become a sprawling, red-tape laden megastructure, will now become a sleeker, three-pronged business focused on Yahoo’s “three clients”: audience, advertisers, and publishers. The reorg is so smart because, far more than just shifting business units around, it tackles Yahoo’s most serious underlying problems of corporate culture.
Consider Yahoo’s troubles. On the surface, its chief source of pain seems to be that it’s gotten too big for its own good. One manifestation of that problem is product redundancy–which Garlinghouse discusses at length, pointing to overlaps like YME / Musicmatch, Flickr / Photos, YMG video / Yahoo Search video. A subtler version of the size problem is the oft-heard complaint that Yahoo does absolutely everything, but doesn’t really stand out anywhere. Businesweek’s Rob Hof sums up the problem nicely, complaining that Yahoo’s got “many services I want, even [those] I can’t really live without, but they rarely take them all the way to locking me in for good.” A third manifestation of Yahoo’s size is its burdensome bureaucracy.
But the fact that Yahoo’s grown too big is really just the symptom, not the cause. The cause of the problem goes to another problem that Garlinghouse points out: a lack of real vision. The reorg provides that vision for the company, and places it at the crux of the organizational structure. And Yahoo has correctly chosen the vision of a customer-focused business as its new guiding light.
Centering a business around customers might sound obvious; but at Yahoo, it’s a radical shift. Consider what CEO Terry Semel has told The New York Times about the restructuring: “Semel said,” the Times reports, “that when he joined the company five years ago, he focused on increasing the breadth of Yahoo products. Now, he said, the company is beginning a transformation to make itself ‘more customer-centric, not more product-centric.’”
Why has Yahoo been focusing on its own products over customers? Because Yahoo has become a business that’s focused on itself. Having more products means having a bigger, more powerful Yahoo, both in terms of offerings and in terms of market share. And a more powerful Yahoo is central to Yahoo’s core mission of becoming “the most essential global Internet service for consumers and businesses.” To understand how self-focused that mission is, compare it with Google’s vastly different one: “to organize the world’s information and make it universally accessible and useful.”
There’s nothing inherently wrong with a corporate goal of becoming “the most essential” player on the block. And that goal is what’s led Yahoo to ultimately become the most popular presence on the Web. But an excessive focus on personal power can also devolve into expanding the business for expansion’s sake–leading to spreading yourself too thin, product redundancy, and a large, unwieldy infrastructure. On a micro-level, a me-first/client second focus can also translate into infighting, turf wars, and a lack of loyalty towards the company–which are also manifestations of personal interest first, the client second (in this case, the client being the company itself). And as Garlinghouse describes in his memo, all of these problems describe Yahoo before the reorg.
Which is why the new reorg is a lot smarter than just a tightening of Yahoo’s current infrastructure. That could have been achieved by simply sharpening the focus on Yahoo’s already defined product categories like search, publisher, social media, and mobile. Instead, Yahoo’s shifted the entire business structure to become client-focused. Which is a real revolution, one that will gets to the core of Yahoo’s problem. A focus on customers fosters an emphasis on the usefulness of each product, and runs against the wasteful practice of creating an extra business unit just for the sake of having one; it calls for a focus on building quality products over amassing quantity; and it leads to an environment in which the entire business is focused on really getting things done–rather than on defending your turf or your piece of the bureaucracy.
Which is precisely what Yahoo needs now. And it’s why the current reorg is exactly what Yahoo needs to get back on track.
Why Yahoo Likes Newspapers November 28, 2006
Posted by Bill in Behaviorial Marketing, online marketing, Search Marketing, traditional advertising, Yahoo Search Marketing.add a comment
November ‘06 will go down as the month the search giants got serious about newspaper plays. Google has unveiled plans to enter ad management for newspaper classifieds across 50 papers; last week, Yahoo countered by entering strategic partnerships–starting with collaboration on job classifieds, but set to expand into Yahoo help with newspapers’ maps and search presences–for 176 newspapers’ online divisions.
When you think about it, the Yahoo move seems surprising. Newspaper moves make sense for Google, which has long expressed plans for expanding into traditional media; and which, besides, goes for over $500 a share and has money to burn on new initiatives. But Yahoo’s poor Q3 performance, probable eminent downsizing, and “Peanut Butter Manifesto” that looks to streamline Yahoo’s activities, rather than expand them, makes a sudden shift into newspapers seems odd. It’s especially odd in light of the tough times that newspapers currently face, making Yahoo’s move into newspapers a change of course right into an ailing industry.
So my question for this week is: What does a troubled Yahoo see in a beleaguered newspaper business? The answer to that question, of course, lies in local advertising.
It’s not surprising that Yahoo would feel itself lagging in local. From its roots, Yahoo has been a leader in the general online world, from search to e-mail to online content. But leadership in general online services is very different from leadership in the local markets. Consider search: while Google nearly doubles Yahoo’s share of overall search (Google has roughly 50% of all searches, to Yahoo’s 25%), Google leads Yahoo by only a slim lead in share of local searches (according to an e-Marketer study from earlier this year, Google holds about 29.8% of all local searches to Yahoo’s 29.2%).
That general search/local search split makes a good deal of sense, as broader channels operate in nearly opposite ways from local media. Most of the Internet–including search–is used to bring a wide, unknown world a little bit closer to you. That includes finding the Web site you don’t know about through search; it also includes letting you e-mail a friend you can’t speak to because you’re not in front of her. Services for the general Web focus on building better, smarter communication pathways to make a big world smaller.
Local advertising is something entirely different. Local channels focus on enhancing audiences’ participation in a corner of the world that’s already, quite literally, very close to home. Local media isn’t about making a big world small; it’s about entrenching people’s relationships with a world that already is very small. And so while winning in most Internet services relies on excelling at bridge-building across different locations and types of information, winning in local channels relies on becoming an extension of your particular locale. Google’s a powerhouse in global information-bridging, allowing it to take the lead in general search; but it’s Yahoo, which offers rich local information on its portal, that becomes a portion of users’ local experience, thereby reaping the rewards in share of online searches.
Yahoo understands this. And it also seems to understand that, at the end of the day, it’s newspapers that have the infrastructure to make themselves a part of the local scene in a way that globally-focused online players–including Yahoo itself–simply can’t. Newspapers have what Dean Singleton, CEO of MediaNews Group (which is partnering with Yahoo), refers to as “a huge sales force involving thousands of sales professionals”; they also have lots of local reporters creating enormous amounts of online locally-focused content. By tapping into those thousands of ad salespeople, Yahoo is able to capture local advertising markets it’s not built to capture on its own; meanwhile, by helping with the search presence of newspapers’ online content, it’s able to enhance the local results on Yahoo search (where that local content is now more likely to appear), without needing to create its own small army of local beat reporters.
In other words, Yahoo understands that it’s got two choices for expanding its local reach. It can either deliver more of its own local offerings–which will mean defying the Peanut Butter Manifesto by building a workforce to create more local content–or it can outsource its local workforce to the local experts (the newspapers), while doing what it does best as a global online service: serving as the network that takes information from the world’s many locations, and delivers that information to its users. By opting for the second choice, Yahoo’s managing to expand its local reach, while working less. Which is why Yahoo’s move into newspapers may look like it’s taking on more; but it’s actually a way to become more efficient by honing in on its core competencies. Far from being a dangerous expansion, that’s smart business.
Will E-Media Make It? November 20, 2006
Posted by Bill in Broadcast, Google, MSN Search, Online Auction Tips, online marketing, Search Marketing, traditional advertising, Yahoo Search Marketing.add a comment
Last week, advertisers got their first glimpse of the e-Media Exchange, the auction-based TV (and other traditional media) ad-buying exchange initiated by blue-chip advertisers like Wal-Mart, and powered by e-Bay. The Exchange is said to be ready to roll in Q2 ‘07; the advertisers involved got their first sneak preview last week. And as I’ve said many times before, the Exchange is a revolution whose time has clearly come.
But at the same time, it still isn’t clear whether the e-Media Exchange will actually thrive. That’a an open question; there are forces acting both against and in favor of the Exchange’s long-term survival.
Let’s start with the forces against. To begin with, the networks don’t like the Exchange very much; and if the networks themselves don’t go along, the Exchange won’t work (it’s the networks’ inventory that the Exchange is selling). The networks’ reaction isn’t surprising, as the Exchange was created out of advertiser suspicion of network double-dealing when it comes to ad pricing: auctions, the Exchange members feel, are a more accountable and transparent way to buy media. Meanwhile, something else the networks have a strong reason to dislike is the fact that an auction would wrest pricing controls out of the hands of the networks, placing it in the hands of advertisers.
Then there’s institutional culture. The Exchange is an attempt to replace the traditional networks’ culture of lavish upfronts and martini lunches during ad buys. But while martini lunches might not foster transparent pricing, they’re an important aspect of networks’ tradition and corporate culture–and old traditions die hard. That’s especially true amongst large corporations, and the traditional networks happen to be large corporations (or pieces of large corporations).
Of course, martini lunches really do serve a valuable purpose. Television advertisers are spending enormous sums of money; and there’s a strong argument that large purchases are best done face-to-face. Even in the search world, the engines have reps who handle ad spend for larger clients, despite the fact that the actual ad purchases are made via online auction. And if there’s a need for a human interaction in the online auction of search, there’s no reason the same wouldn’t be true of online TV ad buys.
Finally, those behind the Exchange may have made a tactical mistake in declaring that they’ll start the Exchange as a place to buy remnant inventory. That makes sense politically, as the networks would never have agreed to let the Exchange start out by managing anything bigger that remnant. But the move also ignores a basic principle of how auctions work, and that’s a problem. To paraphrase what I’ve said many times, auctions are competitions over specific items–and to create a viable arena for those competitions, you have to offer something that people are interested in fighting over. But remnant inventory is definitionally the inventory that nobody wants; that’s not the kind of stuff that creates bidding wars, and so it’s not the stuff that makes for viable auction marketplaces.
OK, now why should the e-Media Exchange work? Because the auction networks have a record of creating clear and fair pricing. That kind of environment for buying TV spots would be an attractive change for advertisers who crave greater transparency in their ad buys. And if the advertisers are willing to fight hard enough for it, there’s definitely a chance that the networks will go along with the advertisers’ wish.
Meanwhile, the Exchange has made a smart move in deciding to start the program on cable TV. Cable TV is subscriber-based, which means that cable networks have demographic, geographic, and/or psychographic information that the standard networks don’t. That kind of data creates opportunities for the networks to slice and dice ad inventory in ways that clearly showcase each slot’s value. That, in turn, allows networks to charge more for the given slot, which is good for them; and it will also be able to drive more bidding wars over any given slot, which is good for the longevity of the Exchange, which is good for the advertisers. And initial success in a cable TV run will make the Exchange an easier sell to the larger networks, too.
One final note here: There’s no reason to assume that the Exchange is a guaranteed home run, just because it provides auctioned ad buys. Google and Yahoo have clearly shown that auction-based advertising can be a highly viable ad model; but there are plenty of auction media outlets that you haven’t heard of, simply because they died along the way. And whether the Exchange will become TV’s Google, or the next cutting-edge idea that lost because it was too ahead of its time, remains to be seen.
Why Yahoo Won’t Face Google In Traditional Media November 13, 2006
Posted by Bill in Google, Search Marketing, traditional advertising, Yahoo Search Marketing.add a comment
With Google announcing that it’s launching both a newspaper advertising program and contextual radio ads, I’m left wondering if Yahoo will ever follow suit, rolling out a traditional media arm of its own.
For now, obviously, Yahoo in traditional media is out of the question. Yahoo’s facing tough times after poor Q3 performance, and it’s not in a position to extend its reach as dramatically as Google has. But that doesn’t mean traditional will be out of the question forever, and it’s a worthwhile question to ask.
I’ll save you the anticipation and get to the answer right away: the answer is no, absolutely not, Yahoo will never enter the traditional advertising space. I’ll explain why that’s so, but I’ll need to take a detour through the very non-traditional channel of the mobile Internet.
Along with Google’s new traditional ventures, recently both Google and Yahoo made advancements in mobile. Through Gmail Mobile, Google launched its e-mail service into the mobilesphere. Google also joined forces with Samsung and wireless provider Helio; together, the three now provide a satellite-powered Google Maps that helps you locate people. Meanwhile, Yahoo was pushing mobile ahead in a different direction: you can now deliver display advertisements via Yahoo Mobile.
These are very different paths to making mobile better. Yahoo’s mobile display ads will help mobile directly, immediately making it more valuable for advertisers and for Yahoo itself. Google’s mobile advancements, on the other hand, are more indirect; they’re focused on using mobile to get more value out of other channels-specifically, e-mail and social networking technology.
That distinction is consistent with the overall Google and Yahoo mobile strategies. A visit to google.mobile.com shows that Google Mobile services are essentially Google’s core online offerings (Google Search, Gmail, Google SMS, Google News and Google Maps) served up to your mobile device. That’s very different from mobile.yahoo.com, through which Yahoo Mobile provides online standards like e-mail and search, but also offers very mobile-specific items like mobile screensavers and ringtones. Again, Google’s using the mobile medium to get more use out of preexisting non-mobile channels; Yahoo, meanwhile, is embracing the mobile channel directly.
That’s a difference that reaches far beyond mobile. Actually, it’s a difference that runs as deep as each company’s mission statements. Google says it exists to “organize the world’s information and make it universally accessible and useful.” What that means in practice becomes clear when you look to Google’s oldest and most popular product: Google Search. Search organizes information and makes it accessible; more important, though, it creates that accessibility and organization by using a new channel (search) to improve the accessibility of an older one (the Internet). Which is the same strategy that we see Google using in Google Mobile.
Yahoo’s stated goal is different from Google’s. Yahoo aims “to be the most essential global Internet service for consumers and businesses”; it’s looking to be the world’s most powerful new-media empire. That goal makes each new media channel valuable in its own right, as it’s one more potential piece of the empire that Yahoo is trying to build. That emphasis on the channel itself is why Yahoo’s mobile strategy focuses directly on the mobile sphere by offering ringtones, and why Yahoo has built its own enormous publisher network–while Google’s publisher-related activities are limited to searching publisher sites and advertising on them.
And it’s this difference in goals that explains why Google’s a natural fit for the newspaper business, and why Yahoo isn’t. Running newspaper ads might be a divergence from Google’s stated goals of organizing information, but Google-managed print media is very much in keeping with using newer media models to enhance older ones. There’s really not much of a leap from using search engines to make the Internet work better, to using search thinking to make traditional advertising work better. Both tactics are about using one channel to improve the next.
But Yahoo isn’t interested in improving older media. Yahoo is focused on dominating in newer media. Which is why Yahoo would really have no interest in traditional advertising, even if the option were open to it. And it’s why Yahoo won’t enter the traditional space, even after it gets its house back in order. And finally, it’s why the underlying differences between Yahoo and Google are starting to cause the old online rivals to drift further and further apart–and why Google and Yahoo might not be rivals anymore in Web 3.0.
How Microhoo Could Beat Google November 7, 2006
Posted by Bill in Google, MSN Search, Online Advertising, Search Marketing, Yahoo Search Marketing.add a comment
LAST WEEK, MERRILL LYNCH ANALYST Justin Post revived a suggestion that he had first brought up in June: Microsoft, Post argued, ought to buy Yahoo. Post pointed to reasons why Yahoo might be worth more than its current so-so earnings suggest; he also observed that a Yahoo purchase would let Microsoft gain serious search revenue, even before MSN AdCenter gets up to speed in growing its advertiser base. Obviously, the proposed Microhoo would be a threat to Google. Part of the reason is the major share of search that the new entity would gobble up. According to comScore numbers released in May, MSN and Yahoo hold a combined 41% of all search traffic, which is just shy of Google’s 43%. But the threat from Microhoo would only partially come from search. The real threat to Google would be in Microhoo’s ability to adapt to a continuously-converging media world–a world that MSN and Yahoo are ready for, but that Google still might not be as ready for as it needs to be. All of this goes back to each business’s core focus. For Google, everything is search; Yahoo and MSN, by contrast, work in many channels at once and look to integrate them. And because MSN and Yahoo are already thinking about integration now, they’ll be far better prepared when integration really get underway.
You can see that philosophical divergence in the way each entity picks up search traffic. Google’s name is synonymous with search, and it’s the search engine itself that drives the bulk of Google’s search traffic base. Yahoo also gets plenty of direct-to-search visitors; but an awful lot of Yahoo search traffic arrives off of search bars on Yahoo’s enormous publisher network. The same is true for MSN and its publisher network-and MSN searchers even arrive via help buttons on Microsoft software. Google is popular for search in its own right; Yahoo and MSN Search owe much of their popularity to the way each business draws users from its enormous, diverse universe of user interfaces.
The different philosophies also come out in how each business applies search thinking to non-search channels. To take one example, consider search-influenced solutions for content/publisher sites. Google’s big accomplishment here is AdSense, which syndicates actual search ads onto content pages. Yahoo’s Publisher Network isn’t so different from AdSense; but Yahoo has also bought into the Right Media Exchange–which will let the Yahoo publisher network sell display ads by auction, just as Yahoo already does for search ads. Meanwhile, MSN’s publisher network is beginning to offer targeting on a level that’s clearly inspired by the thinking behind AdCenter, MSN’s super-targeted search platform.
These are very different approaches to how search might help publishers and content sites. Google’s AdSense effectively recreates the world in the image of search. MSN and Yahoo, by contrast, truly integrate very different models, combining elements of text-based search advertising with image-based publisher advertising to make something new.
Which approach–Google’s search-centric approach or MSN/Yahoo’s integrative one–is better? A snapshot of today’s online market would give a resounding win to Google, which pulls in roughly 25% of all online ad revenue, the vast majority of which comes from search. Google’s win is strengthened by Yahoo’s poor Q3 performance, especially given the fact that analysts agree that it’s Yahoo publisher network, not its search network, that’s giving Yahoo trouble.
But a present-day snapshot is misleading. That’s because the information world of today is siloed in a way that tomorrow’s world won’t be. Full-length TV content that lives online, and iTunes for your cell phone, are just the beginning of the new convergence–and as channels continue to converge, the ability to work in many universes at once will be increasingly critical. Which is why the multichannel model, and not the search-only model, might just be the long-term winner.
There’s even some indication that the tide’s already turning. That indication comes from online video, which is effectively the merger of the Internet and TV. Just two days after the YouTube acquisition, an Oct. 11 Businessweek article ranked Google Video as the fifth-most popular video destination on the Web–with MSN Video as No. 4, and Yahoo Video at No. 1. Online video is the merger of different media models, and it’s the integrators, not the dominators in search, who took the lead.
Of course, Google may have solved its video problems by purchasing YouTube. But if Google’s video problems come from too narrow a focus on search, then one needs to wonder how many billion-dollar fixes Google can buy just to stay on top as the landscape shifts. Which is why if Google can’t develop a more convergence-minded view of the world, it could face real trouble from a new Microhoo that’s convergence-minded enough, and large enough, to win in Web 3.0.
Yahoo’s “Right” Decision October 23, 2006
Posted by Bill in Online Advertising, Search Marketing, Yahoo Search Marketing.2 comments
A few weeks back, I discussed Yahoo’s disappointing earnings release, and suggested that the solution to Yahoo’s troubles lies in a better integration of its approaches to search within its media arm. Yahoo, after all, is the #2 search engine and the #1 portal; combining the successful components of each would leave Yahoo a nearly unstoppable force in Internet media. And last week, with its 20% purchase of Right Media, Yahoo took a major first step towards making that integration a reality.
As I said already, Yahoo has the second-largest search engine; that engine is funded almost entirely by auction-based advertising. Yahoo is also the Internet’s largest portal, and therefore one of the world’s largest publisher networks. But until now, the two sides of the business lived very different lives: the successful search side monetizes through auction-based advertising, while the publisher side has monetized through far more traditional models for network buys. With its purchase of Right Media, Yahoo can now bring its publisher monetization in line with its search business for all of Yahoo’s remnant space—and that’s key to effective yield management to complement online brand buys. That’s so because Right Media’s primary offering, the Right Media Exchange, enables publishers to offer auction-based purchases of display ad inventory. Yahoo plans to apply the Right Media Exchange technology to sell Yahoo’s own remnant graphical display inventory—within its own publisher network—in an auction.
That’s good news for Yahoo, because advertisers are steadily seeking more opportunities for auction-based advertising beyond search. The auction model means increased transparency; and, because each unit goes for a unique price, it fosters an environment that allows for better metrics. A promising—if anecdotal—sign that auction media may be particularly useful for Yahoo is Lexus’s quickness to join the e-Media Exchange, an online auction marketplace for traditional ad spots, that was initiated by advertisers disgruntled with the non-transparency of traditional ad networks. Yahoo blamed its below Q3 expectations on troubles from the automotive sector; perhaps auction-based display ads can help Yahoo woo Lexus and its fellow automotive advertisers back into the fold in a more material way.
But the value of the Right Media investment is more than just a way to fix the Yahoo portal’s monetization model. It’s an opportunity for Yahoo to capitalize on its strengths and come into its own in the online world, and out from beneath Google’s long shadow. And it manages to do all this while delivering a wonderful strategic counter to GoogTube, which will undeniably expand Google’s reach well beyond search, and far into content.
After all, despite Yahoo’s Q3 disappointment, Yahoo’s publisher side is still both enormous and hugely popular. Google is the #1 search engine; but Yahoo is the #1 online destination overall—due largely to the popularity of its publisher network. Yahoo clearly knows something about the world of online visuals, as well, whether you’re talking about the display ads and image and video content it offers on its portal; Yahoo video search, which predates Google Video by roughly two years; or its farsighted purchase of photosharing site Flickr, which Yahoo bought when YouTube was only a few weeks old. Yahoo clearly understands the worlds of content and online graphical display, and the investment in Right Media and the placement of the auction media model within the Yahoo portal means that Yahoo can now unlock a huge potential that it’s been sitting on for a long time, and truly begin to monetize its greatest strengths. By making that move on the heels of GoogTube, Yahoo has been able to show the world that Yahoo is still the leader in media in the content/publisher model; and that now it’s able to monetize—and help advertisers monetize—in a way that Google currently isn’t able to.
That’s a lot to offer—with or without GoogTube in the picture. And that’s why I predict a new online world order, coming soon. Yahoo, funded by the monetization through auction-based display ads and its large display network, will be able to solidify its lead in both content and graphical ads. It will become for content and graphical display what Google is for search and text links. How crucial will this change be in online history? Mike Walrath, CEO of Right Media, said it perfectly in an e-mail he sent me while I was working on this article; so I’ll leave the final word to him:
“Search has been the center of attention in our industry over the last few years. It’s a huge piece of the online marketing puzzle, but it’s not the entire puzzle; and Google is still behind when it comes to display and branded advertising. Yahoo and others have a substantial lead, and that’s going to be important as it becomes clearer that what’s happening isn’t a competition for dominance in search, but all of interactive advertising.”
How Behavioral Retargeting Could Save Yahoo September 25, 2006
Posted by Bill in Online Advertising, Search Marketing, Yahoo Search Marketing.add a comment
So what happened to Yahoo? Last week, the online giant announced slow ad sales; Wall Street responded by forcing Yahoo stock down 11.2 percent. There’s been a flurry of speculation as to what went wrong, with suggestions ranging from launch delays in the Panama ad platform, to a trickle-down from woes in the financial and automotive sectors. And for what it’s worth, I think most of the speculations have real validity.
But pointing to any one problem misses a crucial underlying issue that’s giving Yahoo trouble. That issue is the disconnect between Yahoo’s search engine and the Yahoo Publisher Network. Simply put, Yahoo’s hurting because its publisher side refuses to learn from its search side.
My reasoning comes from an examination of what’s going wrong at Yahoo, and what’s going right. As Majestic Research’s John Aiken told the New York Times, Yahoo’s search arm seems to be doing just fine. It’s the publisher side–which is in the business of delivering graphical display ads–that’s to blame for bringing ad sales down. (It’s also noteworthy that analysts see Google as still on the rise; Google is much more search-centric than Yahoo is.)
Meanwhile, a recent Reuters story links Yahoo’s troubles with the pain that publishers of all kinds–including The New York Times and Dow Jones–are currently feeling . The trend across publishers would imply that Yahoo’s problems don’t originate with Yahoo. They originate with problems faced by publishers everywhere–including Time Warner, which is busily trying to sell off 18 magazine titles as I write.
What’s the reason for the publisher slump? Marketing strategist Laura Ries, president of Ries & Ries (quoted in the Reuters article), suggests that while ad spending overall hasn’t dropped, marketers are shifting ad spend “all over the place, because they’re looking for something that works.” And if they’re shifting ad spend away from publishers, then they see the publisher model as something that doesn’t work. By keeping their money in search advertising, they’re demonstrating their faith in search as a medium that does.
To get the publisher model back on track, then, publishers need to make display ads work as well as search ads do.
How could publishers close the gap with search? There are several avenues that they could take; for now, I’d like to focus on just one. Publishers need to make their ads more targeted.
From the very start, search has been a personally targeted medium. Each searcher typing in a query has a unique question in mind, and a unique Web page and online experience that will satisfy his/her needs best. Both the search engines and search marketers understand this; that’s why search’s last 10 years has been the story of engines, and search marketers, trying to improve their understanding of who’s searching, and of how to reach out to that exact person in the most effective way. Search’s personalization methods range from delivering the listings that are most relevant for a precise keyword, to serving up geographically targeted search landing pages.
And search’s targeting works wonders, because consumers respond to you based on how relevant they feel you are to them. The more targeted your outreach is, the more personally relevant you can present yourself as being–and the more your customers will respond.
But in stark contrast with search ads, display ads are rarely personally targeted. They’re certainly not personalized in print; and they’re rarely well-targeted in digital display ads, either. Instead, digital ads are delivered to wide segments of online viewers in the hopes that someone, somewhere, will respond.
There’s no reason that the publisher model can’t change. And search-style thinking, and search itself, can lead that change. The new method of behavioral search retargeting, for example, uses individualized search data to deliver highly targeted ads to the most conversion-likely customers. Another example of the new targeting is MSN’s behaviorally targeted display ads. MSN’s display ad targeting isn’t search based; but the thinking behind it clearly derives from the same source as MSN’s targeting-heavy search platform, adCenter. This kind of fusion of search thinking and display ad presentation will be crucial for the ongoing health of the publisher model.
And Yahoo, which is a clear leader in both the search and publisher spaces, is in a unique position to close the gap. So far, it hasn’t gone very far in that direction–hence its ad troubles in Q3 and stock troubles last week. But by letting its search thinking guide its publisher side much more, Yahoo could have better success in Q4–and a stellar year in 2007.
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