Can Marissa Find the Signal @ Yahoo?

In case you missed it, this week Marissa Mayer was appointed the new Yahoo CEO. Marissa is well known within the search engine advertising and SEO circles and even keynoted SES in 2007 (and spoke at subsequent events). Her appointment has stimulated a lot of discussion within the investment and advertising press, and because she is pregnant and planning to take a very short maternity leave, news of her appointment has also crossed over into the mainstream press more so than earlier Yahoo CEO appointments.

With the industry buzzing about the appointment, there seem to be several “open letters” to Marissa and perhaps my wish list below is yet another. Many folks I talk to have been joking that Marissa should simply crowdsource her strategy, relying on the “wisdom of crowds” to help her guide company strategy. I’m not sure that’s a good idea. Yahoo has two constituencies that matter: the user/consumer (the one who consumes Yahoo content and possibly pays for a Yahoo service other than advertising) and the advertisers. Among both the advertisers and the users there is a “power curve” or Pareto effect, meaning that some small percentage of advertisers and/or consumers contribute a lot more to the company than the remainder. If I were to give her any advice strategically, I’d remind her to recall the importance of heavy users and customers.

Marissa has the classic training in CS and AI (artificial intelligence), but her street cred comes from her time at Google. If there’s one thing Google does well it’s search, and while Google has experimented with lots of things, search still powers its top line and bottom line as a business. I was a bit surprised to see that The New York Times quoted Marissa as follows, “She wanted to focus on the Internet company’s strong franchises, including e-mail, finance and sports. She also hopes to do more with its video broadband and its mobile businesses, tapping into its significant base of users.”

The sectors Marissa mentions are nice to have, and sure, there is room for improvement in those areas, and she of course will have to focus efforts in any area that the premium display sales team says they need more inventory. Yahoo is one of the few Internet brands that can sell a decent percentage of its premium guaranteed inventory at high CPMs. However, as a search guy, my recommendation would also be to invest in the kinds of products and ad opportunities that rely on the strongest data signal that advertisers want. Search signal is strong and is one area where things are still ripe for innovation without going head-to-head with Google and while working within the parameters of the Microsoft search alliance.

How about real-time bidding (RTB) for display ads on the search engine results page (SERP) at the keyword level, powered by Right Media? Buying behaviorally targeted ads within Yahoo on search behaviors has always been convoluted. Make it simple. Concerned about “data leakage” due to third-party ad serving? Why not embrace the data leakage and let the bids on impressions rise to reflect the high immediate and residual value from retargeting the impressions. Retargeted clicks are one-twentieth the opportunity in retargeting of search because any one marketer only sees 5 percent of the clicks on the search impressions they would love to have access to. Sure, it’s an aggressive behavioral targeting move, because it allows advertisers to bid at the keyword level and set cookies on the impression ad serve, but it’s being done at the search click landing page anyway. Slather the ads with the Digital Advertising Alliance icons and keep the level of disclosure high. Restrict certain keywords if necessary, but there’s a billion dollars of untapped value there.

Mobile search is also an area that has significant opportunity within some segments and industries. Current CPCs and therefore CPM yields in mobile search are significantly depressed. That’s because most people buying search clicks want a demonstrable ROI based on the click to online conversion and because mobile behavior is different (calls and visits to retail locations abound). Just as Google will likely push small businesses to accept a click to its Plus page (formerly Places page), Yahoo should resuscitate the old Directory product and merge it with a better business directory page than the current local product. Hey, it can buy my fallow site (or one of a dozen competitors) if it needs a ready-to-go online directory site that facilitates businesses claiming and enhancing their business listings.

In a nutshell, Yahoo has a significant advantage with its current user base and it can get a larger share of user time by building lean and mean additions to the core portal functionality. The portal is not dead, and with all the information overload arising from bloggers and social media, the portal can be reborn as a place that raises the cream of the content to the top based on personal preferences.

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