In yesterday's WSJ in the Heard on the Street column they reviewed Yahoo's plan or as they wrote "lack of major overhaul" and then one of my favorite bloggers and must reads, Kara Swisher echoed the statements but filled in some more blanks with her post called Day 56: Yahoo's Sacred Cows Are Spared.
You can read both articles and as you know as a long time reader, I try not to regurgitate other posts just to get a little traffic. However, basically they both wrote about potential Google or MSN/Yahoo combinations and what Yahoo isn't doing to appease investors. Me? I won't argue with those assessments because I too think they should combine with MSN on the search business to compete with Google. However, I do think their recent acquisitions of BlueLithium and RightMedia offer more insight into what Yahoo's plans are for the future. Before I dive into my plan, lets look at a few data points...
- I believe the BlueLithium purchase is not about boosting Yahoo's behavioral targeting ability but more about expanding their reach beyond Yahoo properties.
- RightMedia's purchase was about acquiring an auction buying platform that buyers and sellers can take advantage of.
- Google's sales process is less about buying pay per click search ads and more about using their expanding and more visible content platform. PPC ads are what gets you in the door and deliver cost effective results, while display advertising is where Google can increase their share of your advertising dollars.
- comScore's July 2007 Ad Focus Ranking shows 2 Ad Networks ahead of Yahoo (Ad.com is owned by AOL) and Google's content network right on Yahoo's heals in 4th place. You add Google's reach via search and you probably get to 80% of the entire universe at a very cost effective CPC.
So what's a Yahoo to do? Buy a social network like Facebook for a few billions or a less desirable social network? Probably not. They already have Flickr and Yahoo 360/Groups which doesn't really help them monetize traffic. My guess is for Yahoo to continue to expand their non-Yahoo inventory and use RightMedia to build an auction process around the inventory. The more sites they can add outside of Yahoo the bigger and badder (in a good way) they get. Couple that with their Google-size database of web surfing behaviors and a better buying models for advertisers, they can put the tools in place that can combat Google.
Sure if Yahoo combined with MSN they might be able to compete with Google on the search side, but that is only a minor skirmish to Google. Google is going after a much bigger share of your ad dollars in the form of video ads, display ads on their huge network, radio, print, TV; you get the idea. Yahoo needs to compete with Google for the future of your ad dollars and that future is a lot bigger than search results ads.
Think of Yahoo as a huge advertising network and the tools it needs to compete on that for a larger share of your advertising dollars. TV dollars, behavioral targeting, and bigger networks; that's what it is building.