Can Scott Thompson Reclaim Yahoo's Glory?

Despite the fact that as search marketers we no longer buy PPC search clicks from Yahoo’s Panama directly and instead buy those clicks via the Microsoft adCenter platform, Yahoo’s fate as a search engine is important for two reasons.

First, in order for there to be significant PPC search inventory available in adCenter, both Bing and Yahoo combined need to maintain or gain market share. (Recent data seems to indicate Yahoo’s lost share of search queries is going to Bing.) This may be OK for Microsoft and for adCenter, but doesn’t cement adCenter as a must-have platform. Many marketers instead rely exclusively on Google AdWords because they don’t want to invest the time, energy, or money in a second platform – which may not be the right decision, but I hear it all the time.

Secondly, Yahoo’s search retargeting data set (of cookies) is an important asset particularly if Yahoo ever makes it easy to buy through Right Media on a CPM auction basis at the keyword level. Yahoo’s cookie pool is still 20 times larger than even the largest PPC advertiser for Yahoo users because it sees 100 percent of the searches and an advertiser would typically only see up to 5 percent of the clicks across their basket of keywords, including both paid and organic visits (usually much lower).

This week, Yahoo named Scott Thompson, currently PayPal’s president as Yahoo’s new CEO effective Jan. 9. Clearly the decision and the accepted offer were made a couple of weeks ago at the very least, and eBay and PayPal have been aware of the changes for a while.

The question on everyone’s mind is whether Thompson can significantly improve Yahoo’s fortunes. Yahoo still has a lot of assets and is as Thompson said in the release, “an industry icon.” Among Internet marketers there seems to be at least a glimmer of optimism. From a technology-savvy perspective, Scott Thompson is the “anti Terry Semel,” having been a CIO at Barclays Global Investors and Inovant, a Visa company prior to moving to PayPal where he’s been for seven years. He’s clearly got some “geek cred” as a product guy and product guys have to market their own products, so he’s quite familiar with the digital advertising ecosystem. Yet, many Wall Street analysts and those in the digital media space seem to be concerned that he doesn’t live and breathe online advertising and media. I’m not sure he needs to. Despite the Lumascapes’ industry snapshot, the digital media ecosystem boils down to a yield management problem given the traffic and eyeballs you control either directly or indirectly as a network. A lot of candidates under review may come with baggage either favoring premium sales processes for guaranteed inventory, or auction-based sales of inventory (beyond search). Perhaps Scott can evaluate the ecosystem with a fresh set of eyes and break through the politics and silos that continue to exist years after the drafting of the Peanut Butter Manifesto in 2006.

Analysts on the street have been following Yahoo for a long time and recently have been treated to a roller coaster ride of CEOs. It is instructive to review the opinions of selected analysts.

Goldman Sachs analyst Terry Heath had this to say about Yahoo’s problems:

“With the deterioration of Yahoo’s core business – user engagement declining, stagnant email product, lack of substantive mobile strategy – turnaround needs to happen at many levels, including product development, infrastructure improvement, talent retention, and brand building, among others, to return the company to a positive growth trajectory. Revenue has declined for the last 12 quarters and with competition continually innovating in these areas, execution of new strategic initiatives and product improvement could be challenging.”

Citigroup analyst Mark Mahaney discussed how Yahoo poses different challenges than PayPal writing:

“However, we are somewhat concerned that he does not have strong media/advertising experience, which we believe Yahoo needs, given the structural issues surrounding the company’s search and display initiatives.”

Doug Anmuth, an analyst from J.P. Morgan, predicted:

“Yahoo! focus is likely more on products and technology: Scott Thompson’s operations and technology background (CTO of PayPal prior to becoming PayPal CEO) hints at a renewed focus for Yahoo! around products, platforms, and advertising technology. In particular, we believe Yahoo! could focus more on programmatic selling of display and search campaigns using greater capabilities around real-time bidding, data mining, and personalization. We believe this is critical to Yahoo! competing with Google and Facebook in the display space going forward.”

Stifel, Nicolaus analyst Jordan Rohan stated:

“Yahoo has been lacking a unified strategic vision for several years. We believe Scott Thompson may be able to bring that vision, as well as the know-how to build a healthy ecosystem around Yahoo’s core set of assets.”

Clearly Scott has to win over Wall Street, employees, and advertisers if he really wants to hit one out of the park or even deliver a solid triple. Stay tuned. My guess is it won’t take long before Scott makes his vision and strategy known. He’s had some time to think about it already and has probably been up at night for a while thinking about the challenge Yahoo poses for him.