Yahoo’s Pay-Per-Click Battlefront

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I was listening to a great podcast from Stanford University’s Entrepreneurial Thought Leadership Series. Sue Decker, the President of Yahoo gave an excellent talk about Yahoo! and their future. It is definitely worth listening to if you want to understand where Yahoo is heading. Although based on the recent exodus of many Yahoo! managers, it makes me wonder how much confidence Yahoo! employees are placing in Ms. Decker’s vision.

Nevertheless, one small point presented on the podcast had to do with Yahoo’s objective to quickly integrate new acquisitions into their business. Ms. Decker stated how one of Yahoo’s biggest failures in the past was the ridiculously slow integration of Overture into Yahoo’s network. Boy – truer words were never spoken! I recall writing about how Yahoo completely screwed up their Overture acquisition and how it was terrible that Google was able to so easily leap-frog Yahoo Search Marketing in PPC especially since Overture created the market! Basically Yahoo! had the foresight to acquire Overture at the right time and then got stupid and let it sit on the sidelines while Google changed the model. What a shame.

Ms. Decker’s presentation though was really interesting to hear how she believes that Yahoo’s newer PPC platform, Panama, is closing the gap on AdWords. She was one of the executives who pushed for Panama in 2007 so of course she’ll be supportive of it. However, tucked deeper in the presentation was a statement about how Google AdWords generates far more revenue than Yahoo per opportunity and how Yahoo was pushing hard to close the monetization gap. Panama closed the gap by 30% or something like that. Why this is interesting is that I believe Yahoo is generating more money from PPC but that the advertisers’ experience is worse (I haven’t checked Yahoo’s financials to confirm this). It appears to me that Yahoo’s objective behind Panama was to close the revenue gap and not to necessarily to improve the advertiser’s experience. Of course, Yahoo adopted the “black box” quality scoring algorithm innovated by Google but they left out stronger improvements to the interface which Google has executed perfectly.

Consider the Keyword Tool. Google is on their 3rd, maybe fourth version of the tool with each version more powerful than the previous while Yahoo created a keyword tool far worse than the original Overture Keyword Suggestion Tool and has yet to make a single real improvement. What’s going on there? Yahoo certainly has the engineers to create powerful tools so why is there no priority to get it done and keep pace with Google?

Ms. Decker stated that she believes Yahoo is positioned to be the dominant player for integrated display/search advertising.  As she pointed out, Yahoo already has a leadership position in display and only second to Google in search.  But if they struggled to integrate Overture and have yet to even get close to narrowing the gap on Google, then how will they pull off domination? Integrating a broken PPC product into display may only hinder success.
I’m not complaining – I am quite happy using Google AdWords but I would certainly like to see some real competition come into the PPC market that can hold their own against AdWords. I don’t know if a MSN-Yahoo! deal would have made things better though. MSN AdCenter is decent, maybe even better than Yahoo Search Marketing in terms of interface, not reach, but integration could be a big mess.
I guess we will see where Yahoo! goes from here. It’s a tough position so I wish the best for Ms. Decker. She made an outstanding presentation (great sense of humor) but hopefully she has enough to pull Yahoo out of its current struggles.

About the Author

Kevin Gold is Director of Internet Marketing at iNET Interactive, a social media company operating prominent online communities for technology professionals and technology enthusiasts. Kevin is a frequent contributing author to multiple publications including Search Marketing Standard, Practical eCommerce, DIRECT, Entrepreneur.com, ConversionChronicles.com, About.com, and On Target (Yahoo! Search Marketing newsletter).

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