• by Laurie Sullivan , Staff Writer @lauriesullivan, May 26, 2010

Music and lyrics can tell us so much. Ironically, just before Yahoo's Investors Day got started Wednesday the song "Why can't we be friends" played across the speakers as people took their seats, which sent Chief Executive Officer Carol Bartz into her own rendition as she took the stage. "Can't we just be friends," she says.

The topic didn't turn toward search until about 20 minutes into the presentation, but when it did Bartz wanted to make it perfectly clear "we are in the search business," though the company has licensed Microsoft's search index and algorithm technology to run the backend. The two claim ownership to a combined 30% of the search marketplace.

But Bartz admits that "first we have to catch up and then we have to pass up." It's not like Yahoo hasn't innovated in search technology during the past few years. She blamed outdated technology for the lag.

"There are several things over the years, just in the last couple of years, that Yahoo has pioneered like search assist, but lately while search has gotten pretty with videos and slide shows and images, we kind of got behind on that part," she explains. "You will see a lot more pretty search coming from us."

With "pretty" will come relevant by making assumptions about what people have interest in. The features that move search past the blue links will start in October.

"Please, do not print or say that Yahoo is out of the search business," Bartz says. "We are in the search business. You will come to any Yahoo page and see search. You will see Web search. You will see vertical search. You will see search tool bars. You will search all frickin over the place. We are in the business."

Being in the search business requires Yahoo to personalize pages. Its 600 million users require that many unique pages serve up with individual content, so people respond and interact with videos, articles and advertisements. Every five minutes Yahoo serves up 32,000 different front page modules, about 1 million per day. The company proved that personalization drives click-through rates. In Yahoo's case it doubles. A trial with Associate Content prior to the acquisition demonstrated a rise in engagement. Customizing MyYahoo returns twice the engagement then others.

Engagement relies on the four Os-local, social, mobile, and video-Bartz told investors. It means real-time information that requires the ability to comment on, rate and blog about. Especially on smaller screens, Bartz says Yahoo can't afford to waste a single pixel for content that searchers have interest in. She knew the Associate Content acquisition would benefit Yahoo after going to the search engine's homepage, clicking on a link and getting content 17 hours old.

That old content couldn't help Bartz make a decision on whether it was safe to make a flight to Europe during the volcano eruption. "I had to go find tweets, real-time information, because at that point that was the content I wanted," Bartz says.

Timing is everything. Content and ads at the correct time is something Yahoo's focusing on. People get up in the morning and read email, they don't start shopping online. I agree with Bartz when she says one of the biggest problems in the online ad industry is "not enough creativity has gone into what the medium will allow." (Amen.)

Agencies need to think about the Web page as a digital canvas and stop trying to stuff copies of print ads or parts of a video that went into a 15- or 30-sec spot on TV into the "tiny rectangle" online.

Technology companies have created amazing applications that ad and marketing agencies are just beginning to explore. I can't emphasis this point enough. You can do better. If you don't have the means to create the technology inside the company, you can tap into emerging technologies from Intel, Nokia, and startups that you likely don't know exist, but can find through industry tech trade groups such as GS1 and AIM Global.

Engagement is "way up" for those display ads being tested at Yahoo, Bartz says. Sometimes people click on and watch them several times in a row. Personally, I have heard that from Google's YouTube group, too.

Don't expect to see a mobile handset or operating system from Yahoo, "and I hope that's a relief," Bartz says. You will see an application stack and partnerships with original equipment manufacturers and carriers. Those partnerships will support mobile search. Then Bartz threw out a stat: Two-thirds of the people in Canada use Yahoo Search on mobile. Stay tuned.