Display And Search

Today we turn from AOL to Yahoo.  Another troubled portal at the center of this display and search convergence I’ve been talking about.  Today Yahoo released Q2 earnings – not a great story from an investor or employee perspective but very exciting for display innovation.

Here are some highlights from the call (thanks to Seeking Alpha for releasing the transcript)

• Non-guaranteed growth – CFO Tim Morse – “Non-guaranteed display revenue continued to grow strongly which partially offset the year-over-year decline on the guaranteed side.”  Great news for convergence fans.  A big part of non-guaranteed for YHOO comes through RMX, this indicates that smart buyers are aggressively investing in the space and shifting away from the old-fashioned guaranteed buys.
• Display Innovation - CEO Bartz talked about two exciting innovations
  • Smart Ads – which allows for behavioral and search retargeting on display (there it is again, Display and Search convergence).  Note – checking out the Smart Ads page, I really like how they’ve tried to bring out the value of display – bringing out awareness, engagement and response all together. Needs to go further, though, to really help buyers understand how to manage display (eg, post-view measurement and attribution; post-view search activity, etc)
  • My Display Ads – a pilot partnership with AdReady to allow self-service ad creation.
• Long tail advertisers - with MyDisplayAds and deal with AT&T to sell Yahoo locally.  Between the newspaper consortium and AT&T will “have a local sales force 13,000 reps strong”.  That’s a lot of feet on the street!  Interesting that, unlike AOL, Yahoo is playing both the self-service AND the salesforce angles here – which is smarter than just hoping small businesses will buy display on their own (which I believe is a few years away).
• APT reset – APT is now “part of the process of making buying (on Yahoo) easier”   This may be a negative for people who dreamed of APT taking over the world, but it’s more realistic and for display convergence, it’s fine, this is exactly what is needed, an easier way to buy guaranteed inventory on the largest media property on the web.
• Goodbye Annoying Ads – “many of our users are put off by a few irritating and high frequency ads that detract from their time with us……. Dealing with these ads will be a high priority for us”.  Watch out aggressive DR buyers like Classmates.com (if I never see those yearbook pictures again it will be too soon).  But this should level the playing field for buyers that cannot compete with these super-aggressive DR marketers and giving up this revenue will drive Yahoo to innovate even more.
• “Let the bodies hit the floor” – I think US Grant made a comment like this before Cold Harbor, “we have to throw a lot of bodies at these things now because they are inefficient. Over time, give us a year or so and a lot of those bodies can come out….”   Doubt those bodies are too happy to read this, maybe they are being worked too hard to read conference call transcripts.  Hey bodies, work on your resumes!

Yahoo seems to have done a decent job on cost-cutting, but the declines in revenue across the board are disturbing.  Particularly since I’m not sure where future growth comes from.  Bartz brags about being the “largest online media company” but how do you grow from there?  Can Yahoo really hope to attract more people?  Particularly given that they seem to have ceded search.  They specifically said Revenue per Search is down and while I didn’t do the math, lower display revenues coupled with increased page views seems to require lower eCPMs.  So both side of the revenue equation – customers * price – seem to be challenged in the short term.

That said, this call was very exciting for those interested in display and search convergence.  Yahoo is investing heavily in search-like display management tools and committed to removing the inefficiencies in the display buying process.   They are actually ahead of other players with both first generation (Right Media) and next-generation (APT) display buying platforms.  SmartAds is an exciting use of behavioral technology that they hint uses not just internal Yahoo behaviors but “leading 3rd party technologies.”  Finally, they are wisely spreading their bets on the long-tail with both automated and salesforce driven initiatives.  The latter will help provide the necessary education of the small/mid-sized display buyers.  So while Yahoo may not be a great investment, it’s definitely at the forefront of display search convergence.

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