• by Jim Meskauskas , October 2, 2008

One of the first brands of the commercial internet to bring online advertising out of the nerdery and into the mainstream was Yahoo. It was one of the first online destinations to accept advertising, and for a time, was the most recognizable brand exclusively on the Web. When it went public on April 12, 1996 (eight months after Netscape, the first dot-com to do so), Yahoo raised $33.8 million dollars by selling 2.6 million shares at $13 each.

If you've been reading business news or advertising trades in the past five months, you might think Yahoo is a failing company. You might even think online advertising consists of Google and a few other Web companies not worth mentioning.

Yet, Yahoo is still very much alive, despite pressure from its competitors, unsolicited suitors and the press. Google continues to gobble up share in ad dollars spent online (all of it for search, by the way). Microsoft has not once but twice bid on the company. And hostile takeover artist Carl Icahn continues to use the press to push for the ouster of Yahoo's board.

Why is Yahoo's fate important or even interesting? Because it portends things to come - not just for online media, but for media in general. Larger, more mature companies are entering middle age, where consolidation holds the greatest promise of growth. It means online is starting to show the strains, not just the signs, of maturity.
Yahoo, one of the remaining icons of the online media industry, is at once ceding the company it once was and very likely becoming, either by force or invitation, a new new media company.

Yahoo has signed a deal with Google that allows Yahoo to run ads supplied by Google alongside its own search results. Besides being worth as much as $450 million in its first year, the move is meaningful because all search will look like it belongs to Google: Yahoo, the very first online media company to have been a search destination, is essentially surrendering search to its competitor.

Before Google became a verb, Yahoo was the place to go for finding things on the Web. It wasn't technically a search engine, but rather a Web directory created manually by a team of employees who surfed the Web all day to find the right sites for the right combinations of words. Paid search listing placement was not invented by Google, but rather by Ted Meisel, founder of goto.com. GoTo became Overture, and Yahoo bought Overture to become its search solution to complement directory listings.

Yahoo could have been Google. But Google became Google. And it did so by using something that someone else invented and that Yahoo had the first shot at monetizing in a significant, scalable way.

If Yahoo were to become part of another company, one like Microsoft (and by the time of this printing, that might have happened), it would not be just a bigger version of itself; it would be an entirely new company. It would be a new media company unlike anything else that is out there right now.

Yahoo's targeting capabilities, married to Atlas' serving technology and plugged into Drive PM's vast network (Atlas and Drive PM, along with Avenue A | Razorfish, both part of aQuantive, the company Microsoft purchased last year for $6 billion) could make for a display advertising network that delivers more appropriate advertising to larger audiences on a scale that now only Google delivers, through its search product.

As advertising becomes a contest between content engagement and analytics-driven targeting, a Yahoo/Microsoft merger could create a media company that neither could be on its own. The future of advertising is ultimately going to be platform-independent: The location of the media vehicle and the medium through which it travels will only matter to the format of the message, not to the message itself. Access to audiences instead of simple placement of advertising will require the kind of powerful analytics a Yahoo/Microsoft combination would make possible.

While it may seem as if Yahoo is in a struggle for its existence, it is actually in the process of becoming a company that could be a model for what all media companies are going to look like.

Jim Meskauskas is vice president and director of online media at ICON International. (jmeskauskas@icon-intl.com)