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2005

Yahoo Revamps Search Ad Plans

December 23, 2005 0

Yahoo Search Marketing’s getting an extreme makeover.
Earlier this year, Yahoo re-branded its online marketing unit. What was once called Overture became Yahoo Search Marketing in a move to more closely identify the group with its corporate parent.

Next step: the unit moved from Pasadena, California, into fancy new offices in Burbank, California, home of Walt Disney and other high-profile media companies. And now, its executives are launching an aggressive assault to regain some ground lost to search leader Google in an area they had once pioneered.

 

Among the key moves this year, the Yahoo unit in August expanded its Publishers Network, the network of sites that it serves up ads on, to include small-sized publishers. Until then, Yahoo had primarily worked with large publishers like CNN, The Washington Post, and ESPN to display ads on their sites.

Yahoo’s moves come of course as the Internet Media Company seeks to carve a bigger piece of the online advertising pie, which is expected to amount to $19 billion by 2010, according to JupiterResearch. Search advertising will make up about $7.5 billion of that, the research firm estimates, and Yahoo wants to build its share.

By opening up the network to the wider publishing community, it hopes to expand its reach to rival that of Google’s. In the four and a half months since the network opened up to small publishers, blogs have rapidly grown into the most common publisher category.

Willan Johnson, vice president and general manager of the Publisher Network, says his team is looking to work with publishers to give them a say in picking ads that would show up on their web pages.

They are trying to do a lot of different things to provide for a variety of needs out there, said Greg Sterling, an analyst with The Kelsey Group. They have had mixed success. But there is a lot of creativity and they are striving to capture more advertisers.

Under the new program, publishers of blogs and other web sites can give Yahoo the categories of industries for which they think their audience would want to see ads. Of course, Yahoo’s systems would also continue to generate ads based on the content of their sites.

Waiving Fees
Casting a wider net for publishers is not the only step Yahoo has taken. The online marketing unit has also waived its requirement for advertisers to spend a minimum of $20 per month for sponsored search, a move that makes it more competitive with Google, which does not charge minimums. In sponsored searches, businesses pay to have their names come up when users input certain key words in a search box.

Steve Mitgang, senior vice president of product marketing at Yahoo search marketing, says he knows he has got a huge opportunity in front of him. I do not think we are short on vision or opportunity, said Mr. Mitgang. It is being able to take advantage of that and being able to lead the market.

That may be what investors are looking for. Yahoo’s stock has declined recently, trading on at $40.65, off the $42 range it reached in late November.

Beating Google
Yahoo clearly has its challenges. In the past, analysts have said Yahoo is not as nimble as Google at executing services and applications. Until very recently, Yahoo’s new services and products would often hit the market without much fanfare, analysts say.

That was the case in November, when Google said it would allow people to bid for ads on content sites separately from bids for search-based ads. Yahoo’s advertisers have had that option for more than a year, according to Mr. Mitgang.

In many cases, Yahoo managed to launch key products before its rival, which is located just a few miles away in Mountain View, California. But the media and the blogging communities have overlooked Yahoo’s innovation as soon as the search giant launches the same service.

YSM’s Longish History
Yahoo Search Marketing has been around for eight years—though with a different name. Overture was born at startup incubator Idealab in 1997. A year later, it came up with the concept of sponsored search, which refers to the practice of a search engine pulling up paid-for listings in response to a query.

It also developed the model of having advertisers bid on keywords to figure out where the ads would be placed. Yahoo, formerly a client of Overture, bought the Pasadena, California-based company in 2003 for $1.63 billion.

Search companies like Yahoo and Google, which grossed revenue of $3.6 billion and $3.2 billion respectively last year, have built their fortunes on search-based advertising.

Google is clearly the search leader, getting more than a third of all search queries, according to comScore Media Metrix. That means it has a wider audience when it comes to search.

And as Google continues to grow its revenue, which is almost completely advertising-based, with each passing quarter, Yahoo needs to go on the offensive.

On the plus side, Yahoo has extensive global reach. In the United States alone, it had 125 million unique visitors in November, up from 116 million a year ago. It has a lot of information on its users, due to the fact that most of them have to register—and even subscribe—for some of the services.

Integrated Media Campaigns
Yahoo is a portal that offers search as well as various consumer-oriented vertical niches, such as travel bookings, auto sales, and health information, to name a few, works to its advantage.

Honda, for example, used YSM to run an integrated media campaign when it launched the Ridgeline truck in January. In addition to TV spots, print ads, and direct mail, the ad agency bought a bunch of keywords that would pull up Honda’s Ridgeline at the top of search results.

People do not use the web to buy cars in droves—less than 1 percent of all auto sales take place online—but using search helped Honda increase the number of visits to its site.

For Yahoo to really take on Google, it will need all the help it can get from its search marketing unit, which is the foundation its revenue stream is built upon. And as it comes up with innovative ways to capture ad dollars, it needs to look to solutions like integrated media campaigns, which refer to campaigns that blend the offline and online worlds.

Online ad budgets at offline industries are beginning to increase as businesses realize the web can help them generate buzz and do what traditional print and TV ads used to do.

These are still very early days, says Mr. Mitgang. A lot of marketers still have to start to participate even as a lot are moving beyond experimentation into optimization.

But no matter how you look at it, search-based advertising is in many ways still in its infancy. And it will evolve over time as advertisers increasingly come on board.

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