Building a Whole New Yahoo!
Go ahead and double-check your browsers, boys and girls, but we really are at http://www.yahoo.com. Not long ago, Yahoo! was infamous among advertisers for resisting banners over 10K, for absolute inflexibility on its astronomical pricing, for refusing third-party ad serving, for indifference about tracking ad performance, and even for not returning phone calls. Echoing many agency executives, Kevin Howard, director of media and account management at Avenue A, says, "I think a year to two years ago we found it difficult to work with them. It was hard for us to justify to clients their creative, pricing and tracking." Nowadays, type "Yahoo" into your industry analyst search engine and you are likely to see pages of the same quote — "180" — the keyword virtually every ad honcho we could grab used to describe Yahoo!’s new ’tude toward advertisers. "They’ve done a complete 180," says, among others, Ogilvy’s Megan Mores. It used to be a struggle to get an animated banner on the site. Now, says Howard, "their rich media acceptance is the best on the Internet."
Our New Best Friend If industry accolades are any measure, then Yahoo! has quickly transformed itself from being the home of the boring but expensive mass banner buy into a virtual road map for other portal/publishers who want to move to the leading edge of the online ad business. When Ad Age recently assembled a panel of agency executives to compare and evaluate the top three Web properties (including AOL and MSN), Yahoo! was the hands-down winner in every category of agency service, from customization to pricing negotiation, overall improvement, and general understanding of the ad business. The trade daily itself was surprised that the panel was unanimous in judging Yahoo! substantially superior to its rivals in all categories. Agencies now say the great portal has learned a new keyword that may produce a lot of results: flexibility. The company considers virtually every ad format now available, from animation with audio to pop-unders to Unicast Superstitials. Agencies tell us they are having few if any discrepancy disputes with the company. And here’s something we never thought we would hear about the world’s biggest eyeball camp. "Their pricing has been really great, very, very efficient," says Roni Jenkins, director of communications strategy, digital, J. Walter Thompson.
None of which is to say that Yahoo! as a company, let alone a budding media entity, is out of the smoldering dot-com woods just yet. While many credit CEO Terry Semel with moving the mighty portal in a positive direction in the year since he took the reins, Yahoo! continues to struggle back to profitability. It posted a net loss of $53.6 million for the first quarter of this year, and though its sales of $192.7 million beat some estimates, overall revenue is down nearly 50% from the Web’s go-go days of 1999 and 2000. This new spirit of cooperation with the ad industry, welcome as it is to agencies, has not converted into cash yet. The company’s first-quarter marketing services revenue was down 11% from Q4 2001 and off a full 15% from the same quarter last year.
And if Yahoo! is trying harder with agencies than the other gorillas in the pen, it may be because it has more at stake. As a Web-only play, with only incremental revenue coming from user and enterprise fees, Yahoo! had no other choice but to patch its hemorrhaging ad revenues. Unlike Microsoft’s MSN, Yahoo! simply has no other business to cushion a Web downturn. And unlike AOL Time Warner, it lacks other venues that could pick up the ad dollars that are not going to the Web. As the Internet advertising industry goes, so goes Yahoo! "Yahoo! is the only one that doesn’t have an [offline presence]," says Jenkins, "and in the push to integration and convergence they realized that they have to play it smart to get a larger share of Web budgets." As a result, the company has had to aim its sights much higher than beating AOL or MSN to a client. It has had to become extremely proactive about convincing traditional brands like Ford, Lay’s, and Pepsi (all current clients) that this medium deserves a bigger slice of their overall spending. The New Yodelers On Madison Avenue, the secret of Yahoo!’s new reputation is no secret: The company listened. "We made a very focused business decision by talking to the agencies as clients and partners, and we started treating them as such," says Eric Ronning, director of agency alliances, Yahoo!, and all-around "great guy" according to most agencies. In mid-2001, the sales staff fanned out to the agencies and got feedback about agency needs for standardized terms and conditions, for resolving discrepancies, for tracking and measurement, and for more creative ad executions. "And they listened," says Howard. "All of these things have happened." With agencies, long ignored by online behemoths like Yahoo! and AOL, nothing succeeds like a little attention and stroking. "They have made it very clear that we are a priority partner and that they want to be involved with us," says Mores. Compared to the major competitors, "They are going above and beyond." This upgrade, in attitude if not in sales, is very much a people thing, according to those who have dealt both with the old guard as well as "Yahoo! 2.0," a name some staffers now use to distinguish the new regime, according to reports. While Yahoo! won’t comment specifically on the level of its hires and fires, a spokesperson does admit a bit cryptically that it took on "more seasoned salespeople" and that even their average age has increased noticeably in the past year. But agencies are responding particularly well to a series of incoming executives who talk their language. In the sales-oriented departments especially, CEO Terry Semel has replaced many of the young and hip with the seasoned and familiar. Hired in November as chief global marketing officer, John Costello couldn’t have a better big-brand pedigree: P&G and Sears. "Great guy" Ronning was moved to the East Coast, where he seems to be having a successful run with Mad Ave. Planted on the left coast, former Semel pal from Warner Bros. marketing James Moloshok arrived in April as SVP, media and information division, to woo entertainment advertisers. Coming on in October as chief advertising sales officer, Wenda Harris Millard made her bones with the ad Mafia running DoubleClick’s sales force after stints as publisher for SRDS, Family Circle, and the Media/Ad/BrandWeek pubs. "The people they have hired have been high-caliber," says Jenkins. "They are just patient and more intelligent people and just a pleasure to deal with."
Moreover, key executives are both involved and accessible, adds Howard, who now gets his phone calls to Yahoo! higher-ups answered. "Upper management is now involved in every aspect of their media business, and I feel more comfortable going to these people," he says. A number of agencies and Yahoovians themselves credit Millard with reorganizing the sales team into vertical groups that now serve the major client segments with greater expertise: finance, autos, tech, telecom, and the like. Within this realignment, Yahoo! also defined agencies themselves as a vertical requiring its own group, headed by Ronning. While the old Yahoo! was notorious for circumventing agencies and going client-direct, Ronning insists that the new Yahoo! has "a very focused plan, a triangle," in which the interests of client, agency, and Yahoo! are all represented by someone internally, "making sure all parties are working wisely together." Learning What Works Yahoo! may also be detecting and exploiting a leadership vacuum in online media. In meetings orchestrated by the Interactive Advertising Bureau (IAB) and the American Association of Advertising Agencies (AAAA) to standardize contract terms and conditions, Jeff Weitzman, Yahoo!’s senior director of client services, "took a leadership position," recalls Jeff Minsky. Minsky was involved intermittently in the talks between agencies and media companies, and credits Weitzman for bringing his legal background to clarify issues. In fact, in the new Yahoo! rhetoric there is much more talk about "moving the industry forward" than about bringing corporate back to profitability. Ronning, sounding more like an evangelist than a salesman, says, "In the customer-focused strategy, it is clear that we truly believe that the industry is important, that the clients are expecting to After the Masses As with all portal players, one of Yahoo!’s biggest challenges is getting beyond its own original ad story, mass reach. Again, some see Yahoo! as uniquely positioned to move that targeting needle forward. Howard has gone to them for massive Best Buy and AT&T promotions, but has also done niche buys for Smith Barney and Lancome. "If you want women 35 plus in Yahoo! Finance, they can accommodate that," he says. Jenkins finds that unlike other properties, Yahoo! responds to her RFPs with multi-part programs (ads, content, email) that touch users at various points in the 113 minutes they spend with the portal each month. "The analytics are incredibly impressive," says Jenkins. In talking to Yahoo! and its clients, two important themes emerge about where online ad sales generally have to head to inspire greater confidence: managing client expectations and using Web analytics more effectively to project who sees an ad where, and how. Ronning points to the recent Cingular tie-in with Spider-man, which deployed multiple formats and placements to drive everything from brand awareness to product info to sweepstakes sign-ups. He claims that everyone walked away from that campaign satisfied about its value because projections and performance criteria had been set from the start. "It’s really about setting expectations up front and having a true marketing conversation," says Ronning. "Define what success is going to be. That is the true coin of the realm." Forrester analyst Charlene Li agrees that the new sales pitch involves much more precise expectations about what a site offers a buyer. "The conversation I am hearing now is ‘I know which people are interested in your ads,’ versus ‘Who are you trying to buy?’" Yahoo…Oops! Sure, the new sales team is getting raves from agencies, but there is more than a little grumbling throughout the rest of Yahooville about the toll these changes are taking on the once-sacred user experience. No less a tech doyen than Stewart Alsop complained in an open letter to Terry Semel (Fortune, May 2002) that a site "designed to bring pages up and respond to user requests as fast as possible" had become sluggish, cluttered, and disrespectful of user privacy. "This is not Warner Bros.," Alsop warns Semel. "Yahoo! seems to be run by people who don’t understand the technology culture that made it such a great value." And even Yahoo!’s Shen admits that the company is still experimenting with tools for understanding whether the more intrusive ads actually entertain or simply annoy the user base. Apparently, it is not easy to get Web users to tell you whether they minded a given ad.
More pressing is the recent flap over Yahoo!’s indelicate decision to reset the marketing preferences on all Yahoo! Mail accounts. Of course, many vocal Yahoovians screamed about having their profile toyed with involuntarily, but the move also raised doubts among advertisers about the true value of Yahoo!’s direct marketing lists. Anne Holland, publisher, MarketingSherpa, says, "They are trying to grab quick cash by flooding the market with barely ‘permission-based’ lists. So the advertisers one end of Yahoo! is wooing with solid ad sales may be turned off by bad performance with cruddy lists."
Whether and how Yahoo!’s new sales spirit survives market shifts, an always-anticipated sellout to an offline media entity, or just an ad revenue upturn is an open question as well. Neither Yahoo! nor agencies seem anxious to marry the portal off to a Disney or Viacom any time soon, especially considering AOL Time Warner’s notorious difficulties in getting cross-platform synergy to work. For now, and from an agency perspective, "they are easier to deal with when they aren’t part of a huge parent company," says Mores. And while Yahoo! clearly wants to be seen as a traditional media company now, this is the Web after all, a medium that has gone through more reinventions than Madonna, and in much less time. Veterans like Jeff Minsky still recall the old, old original Yahoo! that started its life very advertiser-friendly … until the IPO turned executive attention away from the media business and toward their own fat portfolios. He says, "When your stock price is shooting up every day, you don’t care what the advertising community wants so long as you are making money off of options. I pray that when the stock goes back up again, they don’t resort back to the old model."