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Manufacturing Yahoo strategy news September 28, 2012

Posted by David Card in Uncategorized.
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Does it strike you as a cheap trick to release a year-old strategy document created by an exec who’s no longer there for a CEO who’s long gone and say, Hey, this might be what Yahoo’s going to do, or, Uh-oh, Yahoo doesn’t have a strategy because what’s leaked hints at this old one? I guess that’s what happens when a company cracks down on unofficial communications. And Yahoo’s no Apple.

A revived text-ad contextual display network wouldn’t be high on my priorities list for a Yahoo turnaround. At best, it might be a complementary effort to what Yahoo needs to really focus on: brand advertising. This new initiative from Time Inc., that uses glitzy AOL ad formats that blend advertising and content from name brands like People, Real Simple, Sports Illustrated, and InStyle is the kind of thing that Yahoo should be inventing.

Yahoo content categories like news, sports, finance, and women may not give advertisers that automatic warm brand-y feeling, but they just happen to be online category leaders. That’s not boring. It’s reach and target-ability.

Handicapping Microsoft’s media business July 24, 2012

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Microsoft’s struggles to make a successful business out of advertising led to the company posting its first-ever quarterly loss. The main culprit was a $6.2 billion write-down of the goodwill associated the 2007 acquisition of aQuantive – a company that combined advertising technologies, networks and an agency business. But Microsoft’s continuing losses in its search and ad-driven Online Business division didn’t help. Some have been saying for years Microsoft should never have gotten into media. Is it about to get out?

Microsoft is sending signals that it might be about to dramatically restructure its ad-based businesses:

Why media?

In the past, I’ve tried to make the case for why Microsoft needs to have an advertising and search business. But I’m beginning to have my doubts, and my argument was always stronger for search. Search is technology- and scale-driven, is a core navigation/UI mechanism that threatens Microsoft’s Windows and browser franchises and is the unchallenged cash cow that powers Microsoft’s chief technology platform rival, Google.

A competitive search offering could fuel a display advertising business with user intention data valuable for re-targeting and advertising attribution analysis, two key factors in raising display ad CPMs. Years ago, Microsoft was an early leader in advertising yield management (acquiring Rapt Inc. in 2008) and attribution analysis. Advertising complements Microsoft’s digital living room and mobile efforts. And many consumer app and cloud businesses are paid for via a combination of advertising and fees, even if the idea of B2B marketplaces with advertising as one of the exchange currencies never caught on.

But Microsoft’s recent big acquisitions – Skype and Yammer – may employ freemium business models, but they don’t depend on advertising. They’re far closer to traditional Microsoft strengths in unified communications and enterprise software. Other social media acquisitions by enterprise software firms, like Salseforce.com and Oracle, display much more of a marketing focus than Microsoft’s.

Here are potential scenarios for Microsoft’s advertising and media business:

  • Stay the current course. Keep investing in MSN and Bing, build out ad networks and exchanges with other portal partners like Yahoo and AOL. Jump hard on local and mobile and buy a Yellow Pages company if that’s what it takes. Odds: 3:1.
  • Pick a spot.  Focus on one or two core advertising businesses, but de-emphasize the others and stop hoping for synergies. Pick only 2 of the following: Bing, MSN, targeting/hosting technology, ad neworks/exchanges, MSN, local/mobile. Odds 5:2.
  • Unload the media business. At the risk of being the boy who cried wolf, I could see Microsoft keeping search technology, but spinning off MSN and Bing to a joint venture with Yahoo, perhaps with AOL in the mix. Odds 2:1.

Some hybrid of the second and third scenarios is looking increasingly likely.


Question of the week

What will Microsoft do with its media businesses?

New Facebook ad offerings fill some holes March 5, 2012

Posted by David Card in Uncategorized.
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When Facebook filed for its IPO last month, I wrote that if it hoped to maintain its revenue growth it needed to adjust its advertising strategy to suit big ad buyers. I predicted it needed to change the way it sold ad inventory and add some glitzier formats. Last week, at its fMC event for marketers, it made some progress toward addressing those needs. Competitors and other players in the online advertising ecosystem should note what Facebook is doing right and where it still has holes.

GigaOM readers got an early preview of some of the new Facebook ad formats, but those aren’t going to be enough for Facebook to recognize a quick payoff. Those ads still depend on Facebook’s proving to traditional advertisers the value of social media marketing that hinges on user engagement and viral pass-along via a format it calls Sponsored Stories. Facebook needed to include the following:

Guaranteed reach. Previously, Facebook enabled advertisers to buy a guaranteed number of impressions, but its previewed Reach Generator service means Facebook will guarantee a marketer’s posts will be shown to 75 percent of the brand’s fans within a given month. There is no word on pricing, and this approach is hardly the daypart timing advertisers are used to on TV or online portals. Facebook should add some finer-grained controls or prepackaged slots to support timed releases. And it should build in frequency capping so these ads don’t risk overexposure.

Premium placement. Facebook display ads show up in a tiny, right-rail ghetto. And Sponsored Stories, while they are working their way into Facebook’s news feed, are strictly controlled by Facebook’s ranking algorithm rather than by advertiser needs. Facebook still won’t let advertisers do page takeovers or interstitials, but it introduced a new format that will show at log out. This will be a popular slot for brand advertisers, either for targeted audiences or full-day exclusive takeovers to reach everyone.

Flashier formats. That log-out ad supports video and rich media. Finally, Facebook can pitch an ad unit that is at least somewhat comparable to what portals like AOL and Yahoo and big online publishers like Forbes, the New York Times and ESPN have been selling for years. Facebook demoed an ad for the 3-D release of Titanic that was slick, but it can’t touch the effect of a day-before-opening-weekend Yahoo home page placement. If that spot commands a quarter of a million dollar price tag from Yahoo, think what Facebook could charge for an exclusive home page or photo interstitial.

Steady progress, far to go

At fMC, Facebook also announced that Sponsored Stories would work their way into the news feeds on mobile phones. While that is a step toward mobile monetization — a lack Facebook called out in its prospectus — it’s a small step. Like Twitter’s just-announced in-stream mobile ads, Facebook isn’t targeting by location, and it’s not even clear you can buy mobile separate from the desktop feed.

Facebook also reintroduced Offers, a coupon-sharing scheme; it had shuttered a prior experiment. And company pages will now use the Timeline format. That is getting mixed reactions from marketers, but I suppose as long as Facebook doesn’t explicitly charge for pages it can be pretty arbitrary in how it makes changes to them. Meanwhile, Facebook made some minor but much-needed improvements to its page management and analytics tools.

In my earlier post, I was skeptical that Facebook would make the changes in how and what it sells to advertisers quickly enough, and it would miss out on near-term revenue growth and market share gains. These new initiatives indicate that Facebook, while still focused on reinventing marketing with social techniques where it has competitive advantage, also has its eye on the here and now. It’s not completely ignoring conservative ad buyers.

Facebook won’t grow its ad revenue 69 percent in 2012 the way it did last year, but it could double the 24 percent rate projected for the U.S. online display ad market. That means it will gain share at the expense of companies like Yahoo, AOL and MSN. How about Google? Well, that would take an ad network that leverages Facebook’s social graph on third-party sites. Facebook hasn’t changed its story that is has no immediate plans for such a thing. We’ll see.

Question of the week

How fast will Facebook ad revenues grow this year?

Priorities for Yahoo’s new CEO January 10, 2012

Posted by David Card in Uncategorized.
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Last week Yahoo announced it had hired Scott Thompson, currently the president of eBay’s PayPal business, as its new CEO. Thompson doesn’t have any media or advertising experience, and he is still stuck with Yahoo’s dysfunctional board. But he’s got product and technology cred, which means Yahoo should be fixable.

Being a portal that combined content, communications and web navigation used to be a great business. But search and social media have steadily eroded the value of a portal as a launchpad to the web, so Yahoo needs to focus on its current identity as a premium content destination site.

With that in mind, here’s what Thompson should do to get Yahoo growing again in order to retain its position as one of the biggest players in online advertising.

Top priorities

  • Forget about being a technology platform, a social media company or an ad network. Yahoo doesn’t have any compelling services it could deliver through APIs to an ecosystem of third-party apps. It is using Facebook effectively to promote its own content,  though it could do more with Twitter. And as much as I like the potential for a premium advertising exchange to raise the value of its remnant ad inventory, Yahoo should focus on doing that through better targeting and richer ad formats and sponsorships.
  • Target better. In theory Yahoo should have great marketing targeting ability based on analyzing all the information it has on its 700 million users: content interests and real-time behavior, authentic email identities, search behavior that is critical for retargeting display ads. Thompson may not be an ad guy, but he’s a data guy (he sits on the board of Splunk) and has said that data analysis will be key for Yahoo. I interpret that to mean Thompson must make Yahoo the best vehicle for targeting display advertising next to high-quality content. That means hiring big data scientists and investing in targeting and yield-management technology, and it sounds like Thompson’s on board.
  • Focus on brand advertising. Yahoo could adopt AOL’s big, rich media “Devil” ad format and then leave AOL in the dust with brand advertisers by servicing them and their agencies to death. It’s already at work on advertiser relations, but it needs to accelerate the process. Yahoo should hire more-expensive ad salespeople while Yahoo U.S. head Ross Levinsohn rebuilds relationships with advertisers and agencies. It should reassign the content farm team to creating quality sponsorship advertorials. Yahoo can also do more cross-media event sponsorships like its Sundance Film Festival promotion.
  • Bulk up on quality content. Lately Yahoo is less focused on selling itself than on unloading its Asian assets: There are tax advantages to trading those for other properties. Names like WebMD and The Weather Channel have come up, and they would both be great additions for Yahoo — WebMD for its task-focused ad-friendly audience and The Weather Channel for its everyday utility and cross-media opportunities. It might also want to look at youth or technology content brands that aren’t already part of bigger media companies; SB Nation is putting together an interesting network of properties.

Innovation opportunities

Thompson is already working on talent retention by talking up innovation. At PayPal, 40 percent of resources reportedly went toward projects with longer-term payoffs. Thompson might have a lot of ideas about e-commerce, but he should stay away from social commerce and the crowded daily deals space unless Yahoo can better target offers aggregated from third-party deal companies.

He is probably thinking hard about mobile, too. Rather than display ads, mobile advertising will likely center on search and offers for some time. There may be some opportunities for sponsored content. Yahoo’s phone efforts should focus on content and email rather than ads. Its IntoNow product — a sort of Shazam for TV — is truly innovative, and it presents ad syncing and interactive TV content opportunities that will pay off on tablets sooner than on phones (and way sooner than via Yahoo TV Widgets). Yahoo’s other new tablet app, the Flipboard-like Livestand, seems rough around the edges but supports the kind of big, glossy magazine-style advertising that Yahoo must deliver.

Here is how partners and competitors should evaluate Yahoo in the next six to nine months:

  • Big advertisers and agencies should get plenty of love from Yahoo, and they should demand proof of ad effectiveness. They should ask Yahoo to foot some of the bill for expensive media planning studies.
  • Google barely participates in brand advertising and seems happy to collect ad network fees rather than own more content inventory. Eventually, Google could try to replace Microsoft as Yahoo’s search technology supplier via its better conversion rates, but it might have to do more data sharing with Yahoo.
  • Facebook wants to raise the rates it charges for ads via targeted brand advertising but needs to offer better formats and sponsorships. Its role in content discovery is safe.
  • AOL and MSN need to execute a strategy similar to Yahoo’s, though each is more invested in being an ad network. Any Yahoo failure with brand advertisers is an opportunity for them.

Question of the week

What technologies should Yahoo acquire from outside?