"Our real goal is to have full ownership of where and how our
inventory is positioned in the marketplace," Wayne Powers, Yahoo's
head of North American sales, said in an interview yesterday.
In the short run, Yahoo carries the risk of eliminating a
substantial revenue stream, as advertisers looking for
performance-based buys through demand-side platforms and other
intermediaries, and that don't want their own seats on Yahoo's
Right Media Exchange, go elsewhere.
But the company is making a longer-term bet that stripping out
the middlemen will lead to higher online ad revenue without
alienating its biggest brand advertisers..
"When arbitragers come in and get access to your inventory, no
one is happy," Mr. Powers said. "Advertisers are paying a lot more
than if they bought direct and we're not happy when people position
themselves as representing our company."
The consensus in industry circles is that this is actually the
best time for Yahoo to make such a move, when revenue expectations
are tempered and the rebuilding process can be under way by the
time a new buyer or investor steps in. In essence, Yahoo is ripping
the Band-Aid off while there's already a good deal of pain. Mr.
Powers said he is confident that the board will work only with
potential buyers and executive candidates who believe in the recent
steps Yahoo has taken to revamp its monetization strategy.
"The strategy we have in place they feel very confident in," Mr.
Powers said of Jerry Yang and the rest of Yahoo's board. Whatever
the outcome of the review, the board will look for a resolution
where possible investors or acquirers have "alignment on strategy
and vision," he added.
Reactions from retargeters and DSPs have been mixed. Several
execs say they understand that Yahoo wants only to work with
partners that add value and are transparent. But these same execs
believe their companies fall into the value-add camp. After being
cut off, at least two retargeters offering to work out better deals
with Yahoo or to make their buying practices more transparent. Both
efforts were rebuffed.
Yahoo has talked about these changes for some time, and several
affected DSPs said they began preparing well in advance so that
clients could obtain their own seats on the exchange and still use
the technology to make buys. But there is widespread displeasure at
the short notice -- just a week and a half, including the long
These DSPs continue to seek out several answers from Yahoo this
week: Will advertisers submitting paperwork for a seat on the Right
Media Exchange before the Friday deadline still be able to buy
through their DSP's seat in the likely event that an agreement with
Yahoo is not finalized before the deadline? And how will Yahoo
delineate between advertisers that do and don't need their own
seats? One DSP exec said he was told that only "Fortune 1,000"
advertisers would need their own seats on Yahoo's ad exchange.
Through their trading desks, advertising agencies are the
biggest proxy buyers of Yahoo online-ad inventory for clients, but
according to sources at agencies and at Yahoo, agencies will be
exempt from the changes. It is clear that Yahoo wants as close a
relationship with agencies as possible and is not requiring their
clients to get seats on the exchange.
The inventory Yahoo sells on the exchange still comprises a
small portion of its overall revenue and margins. The big money
comes from the splashy brand advertising Yahoo's sales force sells
to major clients, with whom Yahoo hopes to work even closer after
the changes. Yahoo was once the undisputed leader in display but
now has Facebook, Google and others nipping at its heels.
Growth in Yahoo's premium display was in the low-single-digit
percentage points in the third quarter, interim CEO Tim Morse said
on an October earnings call. Its overall display revenue was $449
million in the period, basically flat with $448 million a year
Yahoo is expected to end 2011 with 13.1% of the market, vs.
Facebook's 17.7%, according to eMarketer.
Next year, Facebook's share is forecast to rise to 19.4%, while
Google is expected to get to 12.3% -- almost even with the
projected 12.5% for Yahoo.