In Defense Of Yahoo!
Fortune (www.fortune.com) recently did an article saying that Yahoo! (NASD:YHOO) was being overlooked as a company with an excellent future. They praised Yahoo's moves into social networking with the purchase of properties like photosharing site Flickr. "Friends helping friends", Fortune called it. The article went further to praise MyYahoo! as one of the best targeted content plays on the internet.
The story is interesting, but it only looks at the surface of why Yahoo! should do well in the next year or two.
The Financial Times pointed our last week that people searching on the web only do devote about 5% of their time to actually searching. The rest of the time is spent looking at the items that the search returns. This means that text keywords (in search areas like the ones Yahoo!, Microsoft, and Ask.com have) only get limited exposure to web users.
In essence, this leaves internet users spending most of their time on pages with content, pages which usually run display advertising. The problem with display advertising is that the targeting of it has been relatively crude, and, consequently, the response rates tend to be fairly poor compared to keyword search text ads which match the topic of the search.
Yahoo! delivers hundreds of millions of pages with display advertising, but with ads for video-on-demand service MovieBeam running at Yahoo! Finance, all cannot be right in the advertising targeting world.
Fortune is correct that one of Yahoo's great strengths is its massive library of content, both content it has licensed from other sources and content it has created on its own.
But, the content, by itself, it not the key to the future for Yahoo!. It is the ability to put the right marketing message with the content, and drive the price that Yahoo! can charge for that advertising higher.
Really sophisticated advertising targeting on the internet is still in its infancy. Small companies like Revenue Science have been advancing the ability to target ads by behavior. Microsoft has made the point that it can use its huge database of individual activity on the internet to better target ads. AC Nielsen and Yahoo! have been working on this kind of targeting for some time.
The Holy Grail for display advertiser is sophisticated software and measurement tools that will allow this form of advertising to have the kind of relevance that text ads do on search results pages. Companies like TACODA (www.tacoda.com)have been getting promising results in real-world online campaigns using behavior as the primary metric for ad placement.
If we could look inside the labs at Yahoo!, you can be assured that we would see the best software engineers at the company are working to perfect this kind of targeting for display ads. Yahoo! has as much of this real estate as anyone on the web. They have the real estate, and now they are building the houses.
Yahoo! has a price-to-sales market cap of 8.1. It doesn't belong that low. Google is at 16.2. Ebay at 11.7. Even Microsoft is at 6.8.
It's time for another look at Yahoo!. It is about to monetize its advertising base in a way people have only started to imagine.
Douglas A. McIntyre is the former Editor-in-Chief of Financial World Magazine, and former president of Switchboard.com which at the time was the 10th most visited website in the world, according to MediaMetrix. He does not own securities in the companies mentioned here.
Fortune (www.fortune.com) recently did an article saying that Yahoo! (NASD:YHOO) was being overlooked as a company with an excellent future. They praised Yahoo's moves into social networking with the purchase of properties like photosharing site Flickr. "Friends helping friends", Fortune called it. The article went further to praise MyYahoo! as one of the best targeted content plays on the internet.
The story is interesting, but it only looks at the surface of why Yahoo! should do well in the next year or two.
The Financial Times pointed our last week that people searching on the web only do devote about 5% of their time to actually searching. The rest of the time is spent looking at the items that the search returns. This means that text keywords (in search areas like the ones Yahoo!, Microsoft, and Ask.com have) only get limited exposure to web users.
In essence, this leaves internet users spending most of their time on pages with content, pages which usually run display advertising. The problem with display advertising is that the targeting of it has been relatively crude, and, consequently, the response rates tend to be fairly poor compared to keyword search text ads which match the topic of the search.
Yahoo! delivers hundreds of millions of pages with display advertising, but with ads for video-on-demand service MovieBeam running at Yahoo! Finance, all cannot be right in the advertising targeting world.
Fortune is correct that one of Yahoo's great strengths is its massive library of content, both content it has licensed from other sources and content it has created on its own.
But, the content, by itself, it not the key to the future for Yahoo!. It is the ability to put the right marketing message with the content, and drive the price that Yahoo! can charge for that advertising higher.
Really sophisticated advertising targeting on the internet is still in its infancy. Small companies like Revenue Science have been advancing the ability to target ads by behavior. Microsoft has made the point that it can use its huge database of individual activity on the internet to better target ads. AC Nielsen and Yahoo! have been working on this kind of targeting for some time.
The Holy Grail for display advertiser is sophisticated software and measurement tools that will allow this form of advertising to have the kind of relevance that text ads do on search results pages. Companies like TACODA (www.tacoda.com)have been getting promising results in real-world online campaigns using behavior as the primary metric for ad placement.
If we could look inside the labs at Yahoo!, you can be assured that we would see the best software engineers at the company are working to perfect this kind of targeting for display ads. Yahoo! has as much of this real estate as anyone on the web. They have the real estate, and now they are building the houses.
Yahoo! has a price-to-sales market cap of 8.1. It doesn't belong that low. Google is at 16.2. Ebay at 11.7. Even Microsoft is at 6.8.
It's time for another look at Yahoo!. It is about to monetize its advertising base in a way people have only started to imagine.
Douglas A. McIntyre is the former Editor-in-Chief of Financial World Magazine, and former president of Switchboard.com which at the time was the 10th most visited website in the world, according to MediaMetrix. He does not own securities in the companies mentioned here.
posted by douglas mcintyre at 6:21 AM
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