Yahoo Advertising Overhauled: New Exchange, Tumblr Ad Targeting

A Renewed Focus on Ad Tech and Soon, More Deals

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Over the past year, Yahoo has re-launched email, the homepage and Flicker. Now it's time for a new look for its old ad business.

Yahoo is doing away with two of its highest profile ad-tech products -- Right Media and Genome -- and unveiling a new one, Yahoo Advertising. The moves are part of a broad overhaul intended to address the company's ad product shortcomings and provide a more streamlined way for advertisers to buy ads on Yahoo properties, including a freshly tweaked version of Tumblr's top so-called "native" ad unit and eventually ads on Flickr.

Yahoo CEO Marissa Mayer on stage at CES
Yahoo CEO Marissa Mayer on stage at CES

"We want to signal that advertising is a core part of the Yahoo brand proposition to agencies and advertisers," Scott Burke, senior VP-advertising technology at Yahoo, said .

Yahoo's aging ad exchange Right Media will be renamed Yahoo Ad Exchange, and 18-month-old audience-targeting program Genome will be dubbed Yahoo Audience Ads. The company is also taking the wraps off its automated ad buying tool, Yahoo Ad Manager.

Yahoo was an early leader in automated ad buying with its 2007 acquisition of Right Media, but since then it has struggled to keep pace. Yahoo's display advertising business has experienced four straight quarters of year-over-year revenue declines. During Yahoo's second-quarter earnings call in 2013, Yahoo CEO Marissa Mayer said that the rise of automated ad buying had hurt Yahoo's display ad revenues.

Focused on ad tech
But Yahoo is looking to reverse that. Yahoo M&A chief Jacqueline Reses has told several groups of advertisers at the Consumer Electronics Show that the company is "intensely focused" on ad tech and will be making more deals in the coming year.

Media buyers have the right to be skeptical. Yahoo publicly recommitted to updating its Right Media exchange in September 2012, but buyers have continued to complain that its technology is out-of-date.

But Mr. Burke said Yahoo Ad Exchange is more than just a rebrand of Right Media and "closer to a whole new exchange." For example, Yahoo is now allowing publishers to set up their own private exchanges using the technology.

The exchange will still handle more traditional automated ad buys based on a combination of Yahoo audience data, third-party data and the advertisers' own data. Then Yahoo's technology finds people who fit those parameters across its owned-and-operated properties as well as on non-Yahoo sites.

Monetizing Tumblr
Yahoo is also finally applying more of its ad-tech heft to Tumblr, the microblogging service it acquired last May. Tumblr's in-stream Sponsored Post ads will now be called Sponsored Posts Powered by Yahoo Advertising. Advertisers will now be able to target these ads based on people's gender and geolocation (state and select DMAs) and will only pay when the ads elicit Tumblr user actions such as reblogs, follows and likes.

Yahoo's photo-sharing site Flickr already runs standard display ads, but Mr. Burke suggested it will eventually receive the "native" treatment, if it hasn't already. "Having Image Ads enables us to experiment with that kind of ad product in our image products," Mr. Burke said. Asked if Yahoo is already testing those types of ads on Flickr, he said "I'm sure there are buckets out there."

In addition to the ad news, Yahoo made a wave of product announcements on Tuesday during Ms. Mayer's keynote at International CES. Here's a summary:

Aviate acquisition: Yahoo acquired a startup called Aviate that bills itself as "the intelligent home screen." Ms. Mayer said the company automatically organizes people's mobile apps "based on contextual clues bringing you what you need when you need it."

Yahoo News Digest: A mobile app that delivers two daily summaries of the day's news. Stories are sourced from news publishers and aggregated by computer algorithms that spit out a condensed version including text, photos, videos, maps, Wikipedia entries, tweets and links to the original sources.

Digital magazines: Yahoo has updated its food and tech sites with more visual layouts that organize articles and videos as tiles. People click on a tile to expand the article in the window, as opposed to opening a new web page. Yahoo has adopted the full-screen magazine-style ads popularized by Vox Media and Say Media last year that appear within an article as people scroll though it.

Yahoo Smart TV: Yahoo is rolling out a revamped product for connected TVs and set-top boxes that streams live TV, video on demand and online video. Yahoo Smart TV will include a programming guide that uses content recognition and personalization technology to track what people watch on live TV, video on demand and online. The service will also run interactive, targeted video ads that have been tested by Best Buy, FedEx and Verizon Wireless.

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