NEW YORK (AdAge.com) — Its Google search deal is history, Microsoft is no longer a suitor, and a combination with Time Warner’s AOL is theoretical, at least for now. Its stock has gone from an all-time high of $33.63 in October 2007 to $10.34 as of Nov. 12 of this year. And yet Yahoo is a lot more valuable in the eyes of Madison Avenue than it is in the eyes of Wall Street, thanks to an important but oft-forgotten point in the debate over how old and stodgy the traditional portal model might be: Size still matters.
“Advertisers are looking at where’s the traffic, volume and value is today. And today is very positive for advertisers at Yahoo,” said Chris Moloney, chief marketing officer at Scottrade, which in August was the top online-ad spender, according to TNS Media Intelligence. “Google is considered to be the 800-pound gorilla of the internet but it doesn’t have content the way Yahoo does. It receives a massive volume of traffic.”
Just ask Chrysler. Recently, the automaker’s chief marketing officer, Deborah Wahl Meyer, talked about using NBC, Fox and Yahoo as the media pillars of a big campaign to push the automaker’s 2009 Dodge Ram truck. She said she thinks of Yahoo “almost as a fifth network.”
Indeed, according to Chrysler, a home-page buy on Yahoo is worth 75 TV ratings points — the equivalent of four 30-second spots in a hit prime-time show such as ABC’s “Desperate Housewives.” To promote the Ram, Chrysler bought not just Yahoo’s home page but also those of MSN and AOL.
“We needed to go wide and build awareness, but we have to be smart about serving the right content to the right consumer at the right time,” said Susan Thomson, director-media at the automaker. That’s why it also used Yahoo’s behavioral-targeting technology to craft 30 different ad units that could be served up based on behavioral habits. “To us as a partner, yes, [Yahoo] is valuable,” she said.
Wall Street shrugs
You wouldn’t know that looking at the company’s stock price, down almost 65% in the past year. Factoring out the past two months, when everyone’s stock price plummeted, it was still off 45% from November 2007.
But Aimee Reker, senior VP-global director of search for MRM Worldwide, said if she were in the financial-analysis space, she’d rate it a buy. “It’s undervalued,” she said, noting that not only does Yahoo have scale, it has scale against its own content. Indeed, for all its recent efforts, Yahoo missed the boat on search and social networking, but it remains the dominant player in online display advertising.
“Yahoo has the greatest scale and the greatest potential as a brand builder in the online world,” said Rob Norman, CEO, Group M Interaction. That doesn’t mean it is guaranteed success at a time when the online display market will be challenged in 2009. J.P. Morgan’s Imran Khan last week dropped his growth estimate for the category to 6% from 16%. How that will affect Yahoo depends on how advertisers react.
If, for example, among the top 500 brand advertisers in the market for home-page takeovers on AOL, MSN and Yahoo, a few start buying one or two rather than all three, then Yahoo probably wins in that it takes share in a flat market. But if advertisers flee to smaller sites, such as iVillage, Martha Stewart Living and CondeNet or video sites with smaller, more-engaged audiences such as Hulu and ABC.com or to ad networks, Yahoo could have trouble.
Recently, a few buyers have grumbled that Yahoo hasn’t been bringing the sharpest ideas to the table. One buyer on an auto account lamented that when he had lots of money to spend for an upcoming first-quarter campaign, the big idea Yahoo brought back was a banner buy. It didn’t win the business.
Part of Yahoo’s choice, Mr. Norman said, is whether to play to its strengths in display advertising or attempt to out-Google Google and the ad networks. “The dominant gene in Yahoo is to think of advertising as a math problem — machines talking to machines,” he said. “If you reduce it to a math problem, we go to Ad.com.”
Weighing on Yahoo is that even growth of 6% may be optimistic. Optimedia CEO Antony Young said online display spending among his clients overall will be flat in the fourth quarter. In a low-growth or flat market, Yahoo’s best-case scenario would be to take share from both its online and offline competitors, including TV, newspapers and radio.
“I think they will be more successful in competing for general advertising budgets,” Mr. Young said. “In recessionary markets, strong brands … are lower-risk buys from the client perspective.”
That could also help Yahoo compete against others gobbling up portal dollars, such as MySpace. News Corp.’s social network has made huge strides in the past year in tapping entertainment dollars and rivals Yahoo in terms of reach, but social networks are still considered experimental.
Joanne Bradford, Yahoo’s new revenue chief, is optimistic that the company will come out of the recession in a stronger position than its competitors, mainly because it has so many assets. “Yahoo has more levers to pull in this market than any competitor,” she said. (Of course, Ms. Bradford knows one competitor — MSN, which she used to run — very well.)
Consider, for a moment, Yahoo’s recent achievements: Its Olympics site, Yahoo Olympics, dominated the games in August, bringing in more visitors in the U.S. than NBC and Microsoft’s NBCOlympics.com. In September, Yahoo Video overtook MySpace TV as the second-ranked video site to Google’s YouTube. Some of its recent content initiatives have borne fruit. Its original entertainment show “Primetime in No Time” is getting a million views a day. Its business show, “TechTicker” on Yahoo Finance is getting 450,000 views a day, which compares favorably with CNBC. The first intimate photos of President-elect Barack Obama and his family on election night appeared on Yahoo’s photo-sharing site, Flickr.
And there are pockets of innovation at Yahoo that excite advertisers, such as mobile — an area where “Yahoo is pushing the envelope in ways Google’s not,” said Daina Middleton, senior VP-director of Sunao at Moxie Interactive. Another bright spot is its Yahoo Consumer Direct service, a partnership with Nielsen and Wal-Mart that helps trace web ads to in-store sales.