Bartz: Yahoo's Rivals Aren't Google and Microsoft
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Nearly a full year into her tenure at Yahoo, CEO Carol Bartz is still being asked to explain what exactly her vision is for turning around the Internet pioneer.
Yahoo (NASDAQ: YHOO) is a dominant player in Web content, which means a revenue model built almost entirely around advertising. For Bartz, the biggest challenge at Yahoo then is wooing ad dollars away from more traditional media.
"Our competitors at Yahoo are not Microsoft and Google. Our competitors are TV and the other ad formats, because less than 5 percent of ad spending is online," she said in an on-stage interview today at a media conference hosted by financial services giant UBS. "We're still [a] relatively new format and industry, so let's face it, inertia always comes from what you've done forever."
Of course Bartz, who has a penchant for blunt talk, acknowledges that within the online ad sector, Yahoo very much competes with Google (NASDAQ: GOOG), Microsoft (NASDAQ: MSFT) and innumerable other Internet companies for both visitors and ad spending.
But she told analysts and investors today that all those companies share a common goal of seeing advertisers' budgets come into line with the increasing amount of time people are spending online, at the expense of other media.
"As much as we have oversold in technology the preciseness of targeting, it is still very imprecise," she said. "I think Internet advertising oversold itself from the beginning and overpromised."
She said her chief goal at Yahoo is to glean better insights from the immense trove of data the company has about its users' interests, information which makes a more compelling buy for advertisers.
Aiding in that effort have been Yahoo's forays into local advertising, which has seen the company forge partnerships with AT&T and hundreds of newspapers to sell ads on its sites. Those deals have given Yahoo a network of 13,000 locally focused sales reps, and Bartz said she'd like to go even further. "I would like to get hyper-local," she said.
In the advertising world, much of the focus on Yahoo has lately been on the company's split between search and display. Bartz has tried to quash speculation that the deal the company recently finalized with Microsoft will presage Yahoo's exit from the search market, a message she reiterated today.
"What we outsource to Microsoft is basically the engine of search, which is the crawling of the Web," she said. "All the experience on top of that will be a uniquely Yahoo experience. It will not look like Bing, won't even be close to Bing."
Bartz described Microsoft's role in the search partnership, which will see the software giant take over the engineering and technical platform of Yahoo's search engine, as similar to what an Intel chip does for PCs. Microsoft's technology will power the search queries, but Yahoo retain control over the user experience, layering in real-time and social features along with other integrations with the company's sprawling content network.
But she warned against the line of thinking that sees Yahoo losing a head-to-head race with Google by common statistical measures such as search query volume or revenue per search.
"It's very clear that Google is the brand name of search," she said. "When we say 'closing the gap,' I think we wrongly lead you to believe we're going to be on top of Google."
While Google holds a seemingly insurmountable lead in the search market, Bartz said that Yahoo is the "big dog in display," the ad sector on which Yahoo is staking much of its future.
"Winning in display is very, very important to us," she said. So much so that Yahoo has dubbed an inside project "Winning in Display."
Bartz said that prices for display advertising are beginning to rebound after a sustained slump, and that Yahoo's sales force is working with advertisers to develop more integrated campaigns that include traditional banner ads, video and mobile, as well as search.
Under the terms of the Microsoft deal, which is still awaiting regulatory approval, Yahoo would continue to oversee the advertising sales operations.