It’s certainly possible the YHOO made the right decision with regards to their newly announced Google deal. They’re smart folks who obviously have deep domain knowledge of their business. Of concern, though, is that this is a tactical but not strategic move. If they were punting on search because they couldn’t match GOOGs ability to capture/structure data that could be a fair concession — they’ve outsourced search tech since the beginning (recall Inktomi et alia).
But, as a content + services company, that relies on monetization, punting to temporarily gain higher CPMs seems like it could hurt them to the core. Offline metaphors are dangerous since the web really is different. But, if News Corp [NWS] through its sales channel and ad inventory position could get higher effective rates than Viacom [VIA], should VIA offer up its inventory? Doesn’t this continue to weaken VIAs relative position? The web isn’t a zero-sum game, YHOOs inventory position is variable, taking more revenue with higher CPMs allows YHOO to invest in other aspects of their business — these elements could make a collection of tactics add up to a successful strategy.
But I think this will undermine their overall advertising position since many of the dynamics that made it difficult for them to compete in search advertising will continue to make it difficult for them in display advertising. There are differences between search and display. But the factors that contribute to GOOGs ability to achieve higher CPMs for search (massive base of advertisers, great contextual ad serving, good campaign management tools) will be utilized to build their display business. My concern is that the millions of businesses that might have used Panama for search and could be upsold into display will just focus on Adwords and, to use a hackneyed expression - sometimes companies move the piano bench when it’s the piano that needs to get moved.
Wm
2 responses so far ↓
1 TedMurphy // Jun 17, 2008 at 3:22 pm
I think you’ve nailed an important insight with the idea that Yahoo is “just another publisher.” By that, I take it you mean that they are not an application developer.
The problem is that publishers do not get paid on the web. An audience is worthless unless you can sell them stuff. All of the good internet business models are based on ecommerce. Search page views are worth $40 cpm while all other page views (with the exception of Classifieds) are worth a blended $0.55 cpm.
Old school marketers (ie Semel and Weiner) do not come from here — they believe that an audience is worth something. Not true on the Internet.
2 wmfischer // Jun 18, 2008 at 1:58 pm
As you point out with the $.55/cpm comment, Adsense has put a floor into the value of an internet audience. And, for that, they should be commended. But we agree that YHOO as a content+services entity must monetize its audience effectively and steps that undermine these efforts undermine their ability to compete effectively. In fairness to YHOO, they are a terrific application developer, but their Panama experience demonstrates real limits on their ability to tackle and prioritize larger technical problems.
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