Checking in on Yahoo
The stock market doesn’t ever tell the full story, but it often can tell a great story. Such seems the case for Yahoo. Jerry Yang succeeded Terry Semel on June 18th, and investors rewarded the stock with a modest 3% intra-day gain. In the past two-plus weeks since the announcement, the stock has given back four percent, hovering now at an all too familiar price point for Yahoo employees. For the same period, Google shareholders have seen a better return; since June 18, the stock has gained 5.6%. While the stock price might suggest otherwise, the news from Yahoo seems rather upbeat – product enhancements, new features, and logical organizational changes. This week, we thought we’d take a look at Yahoo and assess their chances moving forward.
We decided to look at Yahoo in two ways, the first being a cultivation of the press coverage in the past three weeks, the second, what those in our space have to say. Let’s start with Panama. At the core of its comeback, lies its new search engine platform. The company has never really taken a Microsoft-like stance and publicly stated that it can or even wants to catch Google. Regardless, search continues to make up a very profitable piece of its business, and given its aged and outdated platform (the old system couldn’t even rotate creatives), it desperately needed an overhaul. That initiative became known as Panama, and while it seemed only natural to view Panama as Yahoo’s answer to Google, I suspect it became more what can the company do to increase profits, independent of Google. No single larger opportunity existed, or did they need more just to keep current advertisers, than Panama.
Out of beta and in production for almost two quarters, the new system has begun to feel like just that, a system. No company has seemingly published more on Panama than respected and recently acquired search engine management firm Reprise Media. In mid-June, they released, "Inside Yahoo Panama." It takes a look at "various areas of Panama, including its handling of campaign management, user interface, systems integration and performance." As an SEM with clients large and small, they sit in a good position to provide these insights to the market, and their report provides great explanations coupled with specific data points. For example, those spending less than $40k per month saw their CPC prices rise in the new system by almost six-percent along with data points on click through rates and conversion rates. Overall, The Reprise report reads positive, but treads lightly on the negatives, like a company that doesn’t want to say anything too harsh because they still need Yahoo for their clients. It reinforces most of what you expected – that its better than the old platform, that it will help Yahoo make more money, and that big companies will fair better than smaller. It also shares information you might not have guessed, such as the new system presenting challenges for those who mine the long tail, something we’ll see reinforced later.
As mentioned before, you can view many of Yahoo’s upgrades as simply making the company more money, drawing upon best practices and implementing as the best bang for the company’s buck, not as a way to catch a competitor. Regardless of the motivation, Yahoo operates in a world of competition and other options, so those using their new system won’t evaluate it simply based on how it compares to the previous system. Those using it will naturally compare it to what else exists, and unfortunately for Yahoo, the other option not only happens to be still superior but also the market leader. As one current user and long-time paid search expert said when asked to describe the current sate of Yahoo, "still pretty f’ed up." They now offer features matching Google, e.g. no longer showing bid prices, incorporating performance into position, and offering quality based ad pricing, but these improvements are already two years old. It’s hard to give kudos to a company for finally offering what has been the norm for two years.
Taking a step back, the analysis of Yahoo (primarily from a search perspective) falls into place. Much of their faults, in some people’s eyes, will come as plusses to another and, not surprisingly, the line comes between direct marketers and branding. Yahoo suits two archetypes well – the brands and small advertisers. Both tend to want two things – assistance in the process and a simpler search advertising experience. This makes Yahoo’s dependency on humans, before an advertiser can spend money and online tools for advertisers, a perfect fit. Those in direct marketing don’t want a middle layer; they don’t want tools for making it simple, they want unencumbered access, speed, and the ability to leverage complexities for their benefit. Direct marketers will describe Yahoo versus Google not in terms of simple versus complex, nice versus distant but competent versus incompetent, efficient versus inefficient. While Google still has a love to hate relationship with direct marketers, they make their system easy to use and a true platform – something that a company with sophistication and self-reliance can tap into and turn a long-tail of keywords and content into a fire house of conversions. They don’t make you wait two weeks for approval on terms, have a water-torture like experience when trying to make bulk sheet changes slow, or feature a less than intuitive slow and cumbersome UI. Nor, do they seem to pull anything suspect like having campaigns automatically target US and Canada; although, if you want to change that, you must then do targeting by state, by campaign.
If the new Yahoo truly wanted market share, they might have considered doing what MSN did and making it easy to import campaigns from other engines. That is but one of many examples of how they offer no powertools for the poweruser. Yahoo has nothing that compares to the Google Editor (an amazing program), only editors who must make commission on every change they make and how long they make advertisers wait. Yahoo has bizarre rules that will only infuriate savvy direct marketers. Take the multi-million dollar mobile campaigns. If you offer ringtone services, with Yahoo you can’t bid on cell-phone models unless you sell the phone. That’s like saying you can’t offer accessories to phones unless you sell the phone too. In the end Yahoo’s operations and platform make it very tough for those with higher volume needs, those who don’t just want volume of visitors but have some complexity in the way they set up their accounts. Suffer through it though, and you can make money, as most of us have already given up. Perhaps, though, this is what Yahoo wants. But if the question and focus is on becoming Google, then the answer is, no chance. Their manual culture is to set, and their lack of automation plus human controls will never allow them to scale in a technology-dominated web.
