Yahoo Seeks to Regain Respect

Yahoo set out to regain the respect of the financial analyst community yesterday, holding its first Analyst Day in three years to better explain the nuts and bolts of its business.

“We have fallen, and we really want to get back up. We want to get back up on our tippy-toes,” said Yahoo CEO Carol Bartz.

Bartz kicked off the day by acknowledging that Yahoo, once a “shining star” in the 1990s, had fallen from its lofty height. A day full of presentations from Yahoo’s best and brightest was intended to begin the journey back, she said.

“We’re not here to wow you,” Bartz told the crowd of analysts gathered in Sunnyvale. “We’re here to impress you.”

Yahoo execs proceeded to outline what it sees as its strengths, particularly search and display advertising. Emphasis was made on Yahoo’s technological prowess and the vast amounts of data it collects across its network, which it hopes to translate into “insights” to improve user experience and ad targeting capabilities.

“We’ve only just begun,” Bartz said. “We have a lot of data, but we have little insights. We have more insights than the average bear, but the opportunity is enormous.”

On the search side, Prabhakar Raghavan head of Yahoo’s search strategy, made it clear that Yahoo was not exiting the search business, a statement echoed in several of the presentations.

“The search world is graduating from a ‘Web of pages’ to a ‘Web of things,’ that people care about,” Raghavan said. “The Web of pages has become a commodity — crawling, indexing and retrieval — that’s all table stakes.”

Yahoo sees its search deal with Microsoft as a way to offload those costs, but it feels like its keeping the best parts of search for itself, by using the data from search and other online behavior to understand what people need in their everyday lives and then fulfilling their intent, Raghavan said.

But the clear focus for Yahoo going forward is display advertising, an area where it already performs well, and where there is potential for even more growth.

Some of that growth will come from insights gained from the data it collects from users across its network, and from search behavior. Yahoo will still have access to that data under the Microsoft deal, Bartz said.

Yahoo’s content optimization efforts on its new home page have resulted in a more than 50 percent increase in click-throughs on articles, which are customized for each user. Yahoo uses a combination of human editors to choose a group of top stories to feature, and then serves up the most relevant article from that group, based on a user’s profile, past behavior, and other factors, he said.

On the ad side, Yahoo has been testing the effects of multiple ads at the top of a search results page, for example. One study found that having at least two ads on a page improves the clickthrough rate on the first ad by up to 10 percent, he said. Another study showed that for every dollar a particular advertiser spent online, they received $10 in offline sales back.

Working closely with large advertisers is an important part of Yahoo’s success and its strategy going forward, said Hilary Schneider, executive VP of Yahoo North America. The company will particularly focus on three groups of large advertisers:

  1. Emotional brands. With goals to form an emotional connection with users, these advertisers think of Yahoo advertising in the same way they think of TV ads. This group represents 22 percent of the total ad spend for 2009, Schneider said.
  2. Performance brands. These advertisers focus on getting the user to perform a specific action, like buying a product online, or signing up for a newsletter. This group makes up 25 percent of local spend.
  3. Local traffic-drivers. These advertisers want the users who see their ad on Yahoo to perform an action offline, like coming into their brick-and-mortar store to buy something. About 16 percent of all ad spend this year was made by these advertisers.

Yahoo has something for each of these groups, according to Joanne Bradford, senior VP of North American revenue and market development for Yahoo. For emotional brands, it takes a hands-on approach to develop custom “guaranteed delivery” display and video ad opportunities. These are ads where the advertiser chooses the page or section it wishes to advertise on and pays a premium to be there, Bradford said.

Performance Brands are still concerned with where their ads show up, but are more flexible with exact locations and times. These advertisers can buy Yahoo’s non-guaranteed ads, delivered through the Right Media Exchange, or behaviorally targeted ads across Yahoo’s network. Offline traffic-drivers prefer performance-based ad solutions, like non-guaranteed display ads and search ads, she said.

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