Yahoo’s Peanut Butter Recipe

By now you’ve probably read about Yahoo’s leaked internal memo, “The Peanut Butter Manifesto,” a scathing tirade by a Yahoo insider lamenting the dysfunction among Yahoo’s many divisions. If you believe the memo’s premise, Yahoo is inefficient, missing opportunities, and no longer the market leader it once was.

Clearly, running a company that has acquired so many assets over the past several years isn’t trivial. Whether you think Yahoo has fallen from grace unfairly or simply has room for improvement (and who doesn’t?), this column’s focus is on how Yahoo can deliver the kinds of advertising marketers want to buy.

There wasn’t much mention of Yahoo Search Marketing in the “Peanut Butter Manifesto,” probably because the author felt the division doesn’t compete internally with other divisions for attention or ad inventory. Yet, Yahoo’s search division may be able to propel the rest of the company to where it needs to be.

Yahoo and the search division jointly have several amazing assets that should be deployed under one set of managers (or a tightly knit management team) to leverage and improve Yahoo’s position in the marketplace. I mention this not because I favor Yahoo to win the long-term battle for dominance in the online marketing arena, but because additional highly targeted inventory and better options and control over campaigns are better for all.

A competitive environment within a robust, growing market fosters and supports innovation. Nearly every paid placement and behavioral marketer, and many online marketers who buy contextually or by channel, are very interested in spending more money as they lose faith in the effectiveness of some offline media. The industry as a whole is better served by a cohesive Yahoo that innovates and remains competitive.

Let’s look at Yahoo’s assets and how they translate into viable inventory opportunities for marketers while serving consumers.

Large Advertiser Base

Yahoo is second only to Google in terms of a large, diverse advertiser base. Most of Yahoo’s advertisers are search advertisers who may or may not participate in Yahoo’s contextual CPC (define) offerings. However, the largest advertisers are often concurrently advertising in Yahoo’s display ad network. This means dealing with two Yahoo sales reps, which in my mind is stupid. If your ad sales team can’t understand and sell both a CPC-based search offering and graphical media assets sold primarily on a CPM (define) basis, they should be fired.

When you buy advertising from Yahoo, you should have a single contact. Not all advertisers need a rep selling to them regularly. The Panama API (define), like the Google and Microsoft adCenter APIs, lets advertisers access inventory in real time through either their own technology, third-party management systems, or campaign technology developed by their agencies. The future of online, and offline, advertising is API control and access.

Behavioral Information Regarding Search

Yahoo has a great behavioral ad targeting product called Impulse that allows display advertising to be served across the Yahoo network based on behavioral profile data, including search behavior. The Impulse-driven display advertising is sold on a CPM basis, and most search marketers don’t even know it exists. Impulse belongs as a tab in the Yahoo DirecTraffic Center (DTC), so advertisers can bid on post-search banner and rich media inventory on a CPC basis. The Yahoo ad servers can decide, based on predicted effective CPM, when to run an Impulse ad instead of a less targeted run-of-network or contextually targeted ad.

Even text ads could be slotted into traditional banner inventory locations through either a static method similar to Google’s or Flash-based ads that bring life to text by highlighting the keywords triggering a given ad. For example, if I recently searched for “ARM mortgage” and am now reading my Yahoo mail, a Yahoo Group, or Yahoo News stories, I might be pleased to see an ad relating to mortgages I hadn’t noticed before. I might even click. The same holds true for searches on millions of topics.

Large Inventory Pool Under Direct Control

Yahoo has acquired many properties and built others itself. Not all banner or other graphical inventory is sold out on a CPM basis or even properly priced. Yahoo needs to develop a system and structure to sell all relevant ad products to all advertisers with a willingness to spend, including self-service systems for smaller advertisers who don’t require a rep. In addition, Yahoo must continue to leverage this advertiser base across non-Yahoo properties through the Yahoo Publisher Network and integration with Right Media’s platform (Yahoo recently acquired a 20 percent stake in Right Media).

With easier access to more targeted, high-quality traffic, advertisers will spend more. All advertisers and agencies should ready themselves for changes that won’t just be happening at Yahoo, because all the search engines face a similar challenge.

With a strong API and an ad management system that is agnostic to CPM or CPC billing and can handle both text and non-textual ads, Yahoo can serve all advertisers and agencies better. Panama is just the first step, and there are lots of great things brewing at Yahoo.

If Yahoo can serve advertisers with the right mix of media options in the right way, it will gain the respect of advertisers and Wall Street once again. In other words, there are lots of great things you can make with peanut butter when it isn’t spread too thin.

Meet Kevin at Search Engine Strategies in Chicago, December 4-7, at the Hilton Chicago.

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