As Its Holders Meet, Yahoo Taps New Ads
Having averted Carl Icahn's bid to replace its board, Yahoo Inc. will now seek to reassure angry investors it has plans to grow, starting at its shareholder meeting Friday.
The initiative that matters most is squeezing more money from Yahoo's bread-and-butter display-ad business. The goal: to raise the prices advertisers pay for display ads on its main sites and -- what's more of a challenge -- all the lesser-known pages that typically attract little interest from advertisers, such as individual users' Yahoo Mail "in" boxes and Yahoo user forum pages.
Yahoo last year purchased two technology companies to aid the effort. Yahoo has also struck deals to sell ads on sites operated by partners like Comcast Corp. and WebMD.
Mike Walrath, senior vice president for advertising marketplaces, says Yahoo wants advertisers to think less about buying an ad fixed to particular content, like the homepage of Yahoo Finance, and to instead seek to run ads where they will reach a particular type of user, such as someone interested in finance. The former is known as "guaranteed" advertising inventory, because it's pegged to a particular type of content at a particular time. The latter is called "nonguaranteed," because the ad could run wherever Yahoo thinks it can reach a particular audience.
Some digital ad executives say they've been disappointed with the performance of ads sold through some of these new channels. But Yahoo's new push is showing some signs of success. President Sue Decker told analysts that the nonguaranteed business was a big factor in the 20% growth in overall display revenue in Yahoo's second quarter.
With investors breathing down Yahoo's neck, accelerating that growth could be the company's best hope for changing its trajectory, analysts say. Making matters more urgent, the majority of Yahoo's display revenue still comes from the slower-growing guaranteed advertising side. As Yahoo's users spend more time across a range of blogs, social networks and other fast-growing sites, advertisers are following them, pressuring Yahoo's premium rates. In addition, a tough economy has already caused some big brands to scale back their spending, and analysts are anticipating the trend will last through at least next year.
Hilary Schneider, executive vice president of Yahoo U.S., says nonguaranteed advertising becomes "mission-critical as you weather a tougher economy." But she says Yahoo will still work to improve results for its guaranteed ads. "It's not either or. It's both."
By: Jessica Vascellaro
Wall Street Journal; August 1, 2008
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