Yahoo! eGroups Does an About Face on Ad Policy

In a concession to users that industry watchers long expected — but said they hoped not to see — Yahoo revealed last week that it would no longer place banner ads at the top of discussion list emails.

The announcement reverses a policy change enacted by eGroups just prior to its agreeing to be acquired by Yahoo earlier this year. The company, which allows users to participate in email discussions and moderate their own, announced back then that it would place email ads at the top of all email discussion messages. Previously, only a “small number” of lists had banner ads at the top.

Shortly after the acquisition was finalized last month, Yahoo decided to re-place the ads back at the bottom of its emails, according to a spokesperson.

Yahoo declined to comment in any greater length about the decision, attributing it only to “user feedback”.

A message sent out to email list managers by Yahoo provides a shade more detail on the matter, suggesting, perhaps, that tweaking the email ad model isn’t quite over yet: “As many of you have pointed out, advertising is what allows eGroups and Yahoo to continue to provide these services to you. Over time, we will continue to review new ways of operating the service, but we pledge to communicate and solicit feedback from you as we evolve the eGroups service.”

User-generated content like threaded discussions (Usenet newsgroups) and email discussion lists have been around since the early days of the Internet, even appearing on the networks that preceded it. With the advent of the Web, many sites like eGroups have taken on the technical tasks of providing Usenet-like threaded discussions and email discussion lists, with some attempting to monetize that inventory through advertising. Theoretically, the discussion groups — segregated by interest area — would be a highly-targeted medium for Web marketers.

But industry veterans said that advertising and email discussion lists are a delicate mixture.

“Four years ago, we evaluated discussion lists and advertisements,” said ListUniverse chief executive officer Chris Knight. “We had tests in ’97 and ’99, and stopped — because list members would revolt.”

The danger, said Knight and others in the industry, is that by changing anything on email distribution lists — especially ad placement, a company or list owner could risk annoying its users — who then unsubscribe.

“If list users aren’t happy, and they revolt, there are no ads to sell to advertisers,” Knight said. “Obviously, if you have an engaged audience, that creates good clickthroughs. If you have an enraged audience, well . . . ”

With the danger of fickle users, most companies look for ways other than in-message advertising to garner revenue. Yahoo offers a fee-supported, ad-free premium service. Most companies, including Yahoo, also provide both email and Web-accessible versions of the discussions, and serve banners on both.

Space or sponsorships also can be sold on Web pages or site areas related to the discussion list — like the list’s archive, file sharing, chat, bulletin board, or resource pages. Companies also receive revenue through secondary subscriptions, through services like those offered by Netcentives’ Postmaster Direct.

“There’s lot of stuff that’s wrapped around the discussion list community that can create revenue opportunities,” Knight said.

But compared to the vast number who receive free discussion list emails directly from the listowner, Web visits and secondary subscriptions fall short — hence, list serving companies’ great demand to maximize email messages’ advertising.

Insiders say the Yahoo policy change signifies the limits of user tolerance for advertising — and possibly, something about those of the Internet giant itself.

“We already knew this would not fly years ago,” Knight said. “But Yahoo, with their almighty market strength, was the only player I had thought could change public opinion, and they failed.”

Yahoo does not disclose the numbers of emails it distributes monthly through discussion lists, nor the amount, if any, that unsubscribed.

But prior to the acquisition, eGroups handled more than two billion emails monthly.

“When anyone loses a list, that’s potentially hundreds to tens of thousands of users,” Knight said. “This was a move to retain market position.”

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