Entries Tagged 'Yahoo' ↓

Image via CrunchBase

There were quite a few posts  the last couple of days about the Google Yahoo deal. The powers against the deal (a.k.a Microsoft) organized many advertisers to talk loudly about their fear that such a deal will bring with it price fixing from Google side.

But as Danny Sullivan from Ad Age and Marshal Sponder wrote, Google is already fixing prices from day one.
Google has two very big black boxes under its belt.
The first one is the quality score algorithm that determines which ad will appear for each search and also how much the advertiser will pay for it.
Although they give some general guidelines about how this quality score is calculated, Google never really told the world how it is really done.
The second black box is the revenue share Google gives the publisher. As a publisher you have no idea how much of the advertising money is going to your pocket and how much into Google. There is a big chance that even if Google will change this number, you will never really know.
This fact combined with the huge number of publishers and advertisers using their services, gives Google great flexibility in its operations. When times are bad, they can always just add 0.01 cents to their part of the rev share and keep show wall street the growth they need.

With that in mind, you can start to understand why if the deal with Yahoo will take place, Google will have full control over the future of Yahoo. With small tweeks they can control exactly how much money Yahoo will make, how much ads they should give them, and how much money will advertisers will have to pay for these ads.

So is this deal really that bad for the advertisers, the publishers and the market? Maybe… And maybe not. It’s all in the hands of Google two black boxes.

I don’t live in the valley enough times to take the new Yahoo - Google deal as personally as a lot of the bloggers around here. Most reactions were somewhere between anger and contempt to true sadness.
Many people gave their explanation to why this deal is actually bad for Yahoo on the long run, detailing how it will put to death their search and search advertising businesses.
But what people are missing is that by signing the deal, Yahoo kills not just their search efforts, they also kill their long term vision.

In the press announcement that Yahoo published there are two very important quotes we need to give our attention to:

“This agreement provides a source of funds to both deliver financial value to stockholders from search monetization and to invest in our broader strategy to transform display advertising”

Basically Yahoo admits that they can’t beat Google in search advertising and that they need to focus on where they are still leaders, the display advertising market. They put their future on trying to lead this still big market.
But here lies the problem. We all know Google, very soon, will go with full power also after this market, and with the relationship they have with so many advertisers and the DoubleClick acquisition, they have everything they need to also win it.
Now let’s go forward. At the same press release Jerry Young also write:

“We believe that the convergence of search and display is the next major development in the evolution of the rapidly changing online advertising industry.”

This is absolutely true. We all know that web advertising is all about targeting. The better you will target your ads, the better ROI you will give to your advertisers and more money to your publishers. And Targeting is all about data.
What Jerry basically say is that by mining search data to build a better profile of users, you can enhance display advertising performance.
The problem of course lies with the fact that by giving Google access to all those Yahoo search results, they are giving them not just inventory but also this valuable data. They are giving their biggest future competitor their most precious asset they have, securing their failure to win also this battlefield.

Today big news were of course the expected deal between Yahoo and Google.
Yahoo will outsource some (we can guess most) of their search advertising and in site contextual advertising to Google.
This makes Google basically almost unbeatable in search. It’s no longer a technology question of coming up with better algorithm to do contextual advertising. It’s all about the ROI they can give publishers and advertisers. And this is first of all a size question. When you have such a huge amount of advertisers and inventory, you can play the numbers in a way that will maximize the results better than anyone else. Microsoft and the other players simply don’t have a chance.
So there are two big questions that come up to mind:
Is this deal good for advertisers? Still hard to know. In the short run, it definitely makes their lives better. Bid for words on Google and reach also the rich Yahoo traffic. On the long run? When Google own interests is to make prices go up as they take a cut of the sale, it’s always bed to have simply just one player. So for the long run, we have to sit and wait and see how this will play out.
The second important questions is of course - So how can someone beat Google?
It seems that there are now just two ways to beat Google:

1. Create such a better search engine, that you will be able to basically convert Google users. This scenario is very unlikely to happen. The main reason is that it is not a technology question but a psychology one. The Google name is “burned” into people mind so hard that even if you’ll proof to them that your engine can bring better search results, most people will still use Google just out of the fear that they are losing something.

2. Hit Google where it really hurts - the revenue share with their publishers. Google takes approx 30% of advertising money and give the other 70% to the publisher. A year ago there was some discussion in the blogosphere about an open source search platform. A platform that takes on the power of open source to beat Google page rank algorithm and at the same time gives publishers 100% of the advertising deal.
Such a platform can be 29% worse than Google, and still convince a publisher to give it his inventory.
Of course this is all theory. In reality there are many problems in creating sucha platform. From who going to fund the massive datawherhouse needed for this, to how you make sure SEO black hats doesn’t game the sysetm when it is an open source one.

Read/Write web came out with a story today that try to show that Yahoo Buzz got bigger than Digg.
The data that the article is based on is new Comscore data that shows that Yahoo Buzz did passed Digg in the number of uniques.

If you consider just the traffic numbers, indeed it seems that Digg are in big troubles. But a quick look at Yahoo Buzz and Digg home pages will show you a very different picture.

On the Yahoo Buzz home page, the most voted story has 118 votes. Most other stories has less than 30. At the same time, Just by taking a quick look you can see that most stories on Digg home page have more than 300 diggs (votes).
It even get worse for Yahoo Buzz if you go to the tech section where most stories have just about 2 - 30 votes. Even if you look at all stories from the last 24 hours and not just recent hours, the picture stays the same.

So yes, Yahoo Buzz is leveraging the Yahoo home page to build a big reach. But sometimes it’s not about quantity - it’s about quality. Digg users are much more loyal to the Digg brand. Their engagement in the site is much higher. Yahoo Buzz users are more likly to skip to the next hot site, as they are less emotionally invested than the Digg users. There is much more chance that they will stay loyal to the site on the long run. I will even argue that their value to advertisers can be higher (put demographics aside as I don’t know Digg data) as their digital participation is higher.

This is a great example why by looking just on page views and uniques we can get a very disturbed picture of reality. This is exactly why attention and engagement metrics are so important to the future of the web.

Well… not exactly, but they do going to launch a new development platform that allows web sites to enhance the search results.

For example, a video site will be able to enhance the results linking to its sites by adding a preview thumbnail of the video. LinkedIn could use this to display the photo or short summery of the person in the search results.

The big hope here for Yahoo is to give web sites an incentives to send users to the Yahoo Search experience instead to Google.

I think this is a great idea from Yahoo that can give them attention and an edge in the search market.
But if they really want to be innovative and take Google down, they need to find a way to let developers to actually enhance their search algorithms.
In theory an open source search engine could enjoy the minds of thousands of developers around the world.
The big problem of course is how to deal with spammers and SEO experts if you open up your algorithm to the public.