Did Facebook Just Mortally Wound Yahoo, Or Is Its Secret Weapon Not What It Seems?
In the wake of Carol Bartz' firing from the CEO's job at Yahoo earlier this week, I have but one thought: Facebook did it.
True, Yahoo chairman Roy Bostock (who, for you ad wonks, will always be the former chief of D'Arcy McManus Benton & Bowles) pulled the trigger, but there, lurking in the background, was Facebook. It was Facebook's existence, more than anything else, that led to Bartz' ouster. The hard truth, as laid out by Nielsen (via Ad Age), is this: while the average U.S. Facebook user spends five hours and 19 minutes per month on Facebook, over at Yahoo, time spent clocks in at 2:14. While that's apparently good enough for the no. 2 slot in this holy grail of engagement metrics, the distance between the two is, quite simply, vast. Facebook users spend 58 % more time on the site every month than they do on Yahoo.
Layer in the hotness factor -- put simply, that Yahoo is old news, while Facebook is not -- and you get the numbers that are at the heart of Yahoo's trouble. I loved the coincidence - or was it? -- that yesterday, less than 24 hours after Bartz' dismissal, a "person familiar with the matter" whispered to Reuters that Facebook made $1.6 billion in the first half of the year, doubling its performance from a year earlier. While display advertising, per the Interactive Advertising Bureau, grew by 24% last year, at Yahoo it grew by 17%, which might be OK, if it weren't for the fact that, as one of the Internet's leading properties it should probably have above-average display growth, not subpar. More recently, that display growth has slipped to 5% in the second quarter, excluding traffic acquisition costs.
So what could Bartz have done? Aside from gathering some much-needed experience in the advertising business, it isn't really clear. While I expect Yahoo would benefit from a CEO with a stronger advertising background, what Yahoo's troubles center on is how people prefer to find content, and that model benefits Facebook and Google far more than it does Yahoo, even if some of its properties are still the leaders in their verticals.
The reason people spend so much time on Facebook is that it is customized content in the broadest sense. You can find everything there -- from the news that Google just bought Zagat to how much water is currently sitting in your friends' basements. Since it's delivered by people you know, it tends to be relevant content. The status update about my friend's basement prompted me to check out the amount of water in my own. (Thankfully, it's minimal.) On Yahoo, the home page weather report concerns the fires in Texas. I feel for those people, surely, but that news is not exactly relevant to my life.
As for Google, it gets the most monthly visitors, and while its montly engagement time is obviously low - at a mere hour and a half - from an advertiser perspective, it's quality time. We all know what happens: people find what they want, and then leave. Sometimes that act has direct impact on an advertiser's bottom line.
All of this means that Yahoo sits in an uncomfortable position - except for one thing I continue to wonder about. Obviously, the market has decided that display advertising in social networks is far more valuable than display advertising on Yahoo, or other portals. But is that really so? The engagement metrics on Facebook and Yahoo would say yes, but, in both cases, the audience isn't really there to see advertising; it's there to interact with content, and engagement metrics aren't specifically about the performance of advertising. On a personal level, I don't feel that I'm any more likely to interact with an ad on Facebook than one on Yahoo.
If that's the case, then maybe Yahoo's silver bullet is to question what we in advertising increasingly take for granted: that nothing in display advertising has the value of Facebook. Being the second biggest site on the Internet has to count for something.