Yahoo's Little Ad Gap
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Is Yahoo missing the "long tail" of advertisers? Or does it have bigger fish to fry?
If the search engines' pay-per-click ad services were restaurants, Google would be McDonalds: fast and cheap; Yahoo would be Chili's: serving a limited number of patrons, offering a wide variety of higher-priced meals and not promising you a table.
Earlier this week, Yahoo broadened access to APIs that Overture used to only make available to partners, while re-branding the Overture division as Yahoo Search Marketing Solutions. But it still doesn't make it easy for tiny publishers or advertisers.
"With Google, your ads are running within 10 minutes. With Overture, it takes a call or an e-mail to a sales rep. There's a bit of a hurdle getting in," said Jupiter Research analyst Gary Stein. (Jupiter Research and internetnews.com both are owned by Jupitermedia.)
The intent of opening the Overture APIs definitely is not Google-style "click-and-a-credit-card" ad placement, Eckart Walther, senior director of product management for Yahoo Search, told internetnews.com.
"This is more [for] a medium-sized company managing thousands of keywords, and you have an internal campaign management system you use to buy media on Yahoo and Overture links. These APIs will let you hook into our advertising system directly."
Walther added that true self-service, pay-per-click advertising is something Yahoo "should" do. Otherwise, could Yahoo find itself on the wrong end of a pay-per-click ad gap?
The APIs show awareness by Yahoo that search engine marketing companies benefit Yahoo, said Andy Beal, vice president of search marketing at WebSourced, a search engine marketing optimization company. "We've been working within the confines of the tools avail to us, which were restrictive," Beal said. "By opening the APIs, Yahoo has given access to search engine marketers so that we can create and develop our own tools to set up and manage new accounts."
Beal said the new tools will also help him understand and analyze results of pay-per-click campaigns, and, he added, "I guess, to send more business to Yahoo."
Yahoo's focus on big layers has served it well. But there's increased awareness of the importance of the revenue opportunities in the "long tail," the overwhelming majority of very small, niche content sites. The long tail is a statistics concept that caught fire thanks to an article by Chris Anderson, executive editor of Wired magazine.
The idea is, simply, that a little bit of revenue from an awful lot of places can add up to big money.
In 2004, Yahoo made more than $3 billion in marketing revenue. Yahoo doesn't separate contributions from its Overture division, which it acquired in 2003. But Gartner analyst Denise Garcia estimates that Overture pay-per-click ads contributed around 20 percent of its revenue in 2002.
Google made $3.189 billion last year; presumably, most of that came from pay-per-click advertising on its own site, partners' sites and the millions of small Web sites and blogs that take advantage of the Google AdSense contextual ad network.
Could Yahoo expand its revenue by serving the long tail of advertisers who might spend a few bucks every month to advertise their handmade baby booties? Could it easily add another couple billion by offering dirt-simple, self-serve ads?
"Its difficult to say how much money might be left on the table," Garcia said. "You can't just say pay-per-click is the way to go. You have to have the partnerships and inventory to do it," Garcia added.
She pointed out that Yahoo has a lot less traffic than Google does. Google also distributes its ads on a wide variety of partners' sites. "In some ways, it's unfair to compare Yahoo to Google in the sense that Google has more unique visitors than Yahoo does, and therefore has more inventory to sell."
Another question is, should Yahoo go after the baby bootie advertisers? Chili's could certainly increase its volume by offering two-buck hamburger take-outs, for example -- but it doesn't.
"Yes, Google captures all of the small advertisers, and Overture has traditionally done better with the bigger advertisers," Stein said. "On the other hand, Google has had a really bad reputation for customer service, whereas Overture has a dynamite reputation. They're very responsive to problems; if you're extremely sophisticated, they let you alone; if you're new, they work with you. That takes a lot of resources, but these are bigger accounts."
At the same time, Garcia said, "Yahoo is doing phenomenally well in selling display advertising." She pointed out that Yahoo offers all sorts of display advertising formats, and it can charge a premium for extras, such as targeting, exclusives and positioning. "It's a nice business model Yahoo has."