Yahoo has always been known for having high-quality, premium display inventory, the kind that's attractive to brand advertisers. Google's strength has been in selling response-based advertising, which is attractive to direct marketers. During the past year, Yahoo -- in a move that many see as its trying to be more like Google -- has invested heavily in tools that help it monetize its non-premium, remnant display inventory and make it more attractive to response-based advertisers. While that's all well and good, some fear the emphasis on response-based ads is at the expense of its attention to brand advertisers.
Of course, it's tempting to eye Google and its share of the most lucrative online ad channel. According to eMarketer estimates, Google snagged 75% of the $8.6 billion advertisers spent on search in 2007 (and search totals will double to $16.6 billion by 2011). Meanwhile, Yahoo is strong in the second-largest online-ad-spending category, display advertising, which was a nearly $5 billion business in 2007 and should grow to $8 billion by 2011. (It's worth noting that the biggest piece of the pie is offline media -- specifically, TV -- whose budgets Yahoo has sought to crack and that Google is pursuing.)
And incidentally, while the company talks of differentiation, its platform approach makes it look similar to other display portals. Yahoo is building a platform through which advertisers can buy audiences both on and off Yahoo through deals the company has struck with destinations such as eBay and Comcast. AOL is building a similar structure through its investments in Platform A and Microsoft's AdCenter platform also has aggressively pursued deals to sell ads on other sites. What's the difference between buying audiences through Yahoo and AOL?
Competing as a plain-vanilla owner of vanilla inventory and being a clear second in search isn't compelling, said Rob Norman, CEO of Group M Interaction. "They have to rise to the monetization challenge in different way, and making Panama work wasn't the answer."
He suggested looking at what Yahoo has that makes it different from its chief competition, and distilled online inventory into three types: transactional, HD and social. While Google clearly leads in search queries, Mr. Norman argued that including response-based display advertising brings Yahoo at least close to what Google has. Then there's the HD web -- the rich experiences and high-quality content that drive people to search for brands. Yahoo inarguably trumps Google in that space. There's also the social web, the kind of inventory and tools that form opinions; think Flickr or Del.icio.us.
Integrating all those assets certainly isn't easy, and buyers again and again suggested that Yahoo, in a way, is its own worst enemy.
"They're promoting starting points, and those are terrific," said the global media chief at a top-five digital-ad firm. "They've got huge registered database they can tap into and use for targeting and lots of utility in social media. The problem they have is they're not packaging them together."
Perhaps the streamlining of the company will help. Yahoo will be cutting jobs in mid-February, CEO Mr. Yang told investors last week. Yahoo has been trying to integrate its brand and search team for two years, but many of its ad clients say the two are still too separate.
Ultimately, clients want Yahoo to solve digital needs, not just bring them ad opportunities. "The advertiser audiences is now saying, 'Show me, don't tell me [that you're integrated],'" said Amanda Richman, senior VP-director of digital services at MediaVest. "And it's up to them to show us that in a relatively short window."