The reason is simple. Yahoo sells so many ads that it (along with search giant Google) will be responsible for more than half of all online ad spending in the U.S. in 2005, eMarketer predicts. Yahoo's percentage of that outlay in the U.S. is 24.4%, for an estimated total of $3.14 billion this year. Half of that total is from search and the other half is from various forms of display advertising, says David Hallerman, senior analyst at eMarketer. Yahoo's revenue grew 42% to $932 million during the third quarter of 2005.
But Yahoo is the leader because in a space where the Internet is becoming the core of the media industry, it takes more than growth and great sales. Yahoo is more than a seller, more than a portal, analysts and media buyers say. It is a full-fledged media company.
With rich media and online video content promising to be the next big thing, "Yahoo plays hardball while Google is still in the minor leagues," Mr. Hallerman says.
And Yahoo is getting closer to discovering the Holy Grail of online publishers: the way to pull in brand advertising. Yahoo also has a network-TV-sized audience-411 million unique users by the end of the third quarter, and 191 million registered users who Yahoo can segment and target for advertisers. Advertising on Yahoo's home page is as important as advertising on network TV, according to media buyers offline and online. Yahoo's home page inventory is sold out a year in advance.
But, what really sets Yahoo apart is the portal's strategic vision, as it beefs up the site with original content, including a bolstered news service. As Chief Sales Officer Wenda Harris Millard says, "We are defining the next generation of content for the Internet."