Yahoo already is placing ads on eBay under a partnership struck last spring. But adding the portal's lauded behavioral-targeting capabilities to outside sites such as eBay would be a boon for marketers and isn't such a far-off prospect.
Ads outside Yahoo's walls
A corporate reorganization in December gave rising star Chief Financial Officer Sue Decker responsibility for both Yahoo's advertiser and publisher networks. In one of her first public appearances, she noted the company is excited about possibly using its targeting tools to serve more relevant ads outside Yahoo's walls.
"We're actually in a fairly unique position to be able to take advantage ... of the enormous data and insight we have on the largest online audience in the world," Ms. Decker said in Yahoo's year-end earnings call Jan. 23. "We can see what people are putting in their search strings. We can see what kinds of ads they click on. We can see what kinds of sites they were on prior to the site that they are currently on. And that should allow us to serve the most relevant ad regardless of how it's priced to our consumers, and ultimately to share that not only with our large [owned and operated network] but to all of our publishing partners."
Talk of such a scenario was also heard at last week's Newspaper Association of America conference, as Yahoo recently inked a deal with a consortium of newspapers that allows the portal to integrate its HotJobs ads into the newspapers' sites. But the arrangement has the potential to offer a broader menu of ad options.
For Yahoo, creating an off-site behavioral-targeting network would make the most sense using its quality partners, where ad placements are consistent and the content attracts an audience that's attractive to marketers. EBay, for example, has a valuable audience because users generally intend to buy in the vertical categories in which they are browsing.
Taking its targeting to partners outside Yahoo would essentially be a network play, said Ed Montes, exec VP-managing director of U.S. operations at MediaContacts. "Yahoo and MSN and Google have seen how much money the ad networks are taking and how well it's worked out for AOL with the purchase of Ad.com. They're trying to get in that business to extend their reach." And they can help solve two problems that plague ad networks: scale and quality.
Yahoo wouldn't comment on any plans to extend its behavioral-targeting capabilities, but it's no coincidence the advertiser and publisher groups now are aligned under Ms. Decker. The company has made significant investments in behavioral targeting and data services over the past couple of years that have helped it attract more ad dollars. And when behavioral targeting works, marketers ask for more. Yahoo can't expect to continue to add eyeballs at the same rate, so it's natural for the company to look outside its walls for more inventory.
Scarcity of contextual inventory
Consider: Many of the new web dollars come from brand marketers rather than direct-response marketers, yet there's a scarcity of valuable contextual inventory. That means there needs to be more people-targeted advertising and better use of nonpremium inventory that may not have a natural commercial context.
But it takes a network with massive scale to cull meaningful behavioral traits from users. Yahoo reaches 477 million unique visitors worldwide each month, but buyers say that volume isn't enough. Marketers can target behaviorally and cull behaviorial data from across Yahoo-owned and -operated sites, which means Yahoo knows people are in the market for a car only if they visit Yahoo Autos. Extending its reach would strengthen its targeting abilities.
"Creating affiliates based on data will be absolutely 100% fundamental in digital media," said Bill Grossman, CEO of Revenue Science, which powers AOL's behavioral-targeting program and supplies the technology to other sites.
And it pays: Last spring eMarketer projected behavioral targeting to be a $1.2 billion business in 2006 and a $1.5 billion one in 2007.
Of course, there would be myriad privacy and data-ownership issues to sort out. Dave Morgan, chairman of Tacoda, another behavioral-networking player, said his company "processes billions of microtransactions a month to determine who should get paid what." It has spent millions to segregate all the data and ensure that the owners of the sites those data come from are compensated every time they are used to target an ad.