Archive for the ‘Online Advertising’ Category

Why Selling Search To Microsoft Would Damage Yahoo’s Core Display Ad Business

July 7, 2008

I was really intrigued by David Kirkpatrick’s last story on Microsoft and Yahoo in Fortune Magazine.
His key insight was about search market share creating a more liquid marketplace for advertisers.   Search market share drives up the demand for and value of keywords.  That’s why Google’s search ad revenue share is even greater than its search query market share.

But there’s one other thing that Microsoft doesn’t mention when it talks about purchasing just “search”: there really is synergy between search ads and display ads, which is where Yahoo gets the majority of its revenues.  It’s very hard to measure the value of display ads because they don’t surface when a user does something that shows their immediate intent (e.g. search for a lawnmower) – that’s why they can only charge for eyeballs/impressions while search engines can charge for clicks on keywords.

But everyone knows that those display ads create brand equity or other awareness that search ads ultimately get to monetize.  So all the major online vendors (MSFT, Yahoo, GOOG) who happen to have both major display ad networks (Google’s I think was built on Doubleclick) and search engines are planning to track what display ads users look at over time.  Then they will be able to correlate that with later search queries and search ad click-throughs.  In other words, they are finally going to start attributing more value to the display ads, which have never really been measurable.  But Microsoft has a plenty big display ad network so they just want to carve the search business from Yahoo.  And Yahoo is under such pressure to do a deal that they’re willing to sacrifice the future synergy of their search and display ad businesses.  Without search, they won’t be able to offer advertisers the same measurement capabilities as Microsoft and Google.  Their display ad pricing and revenues will suffer as a result.

They have been unable to articulate this synergy, or any other part of their strategy for that matter. It’s ironic, but they probably would be able to leverage that synergy with the Google search deal.  They also seem to be turning their internal platform for their properties into an Internet scale Web developer platform.  But they can’t even convince their top talent to give them some breathing room.  It’s game over.

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Marketing Strategies for a Recession

June 16, 2008

It is not uncommon for large enterprises to spend $300m or more per year just on marketing (e.g., $10bn in sales, 3% marketing budget). The bulk of that money is typically spent on lead generation (i.e., driving interest in the company’s products and services), vs. high level awareness. Is that money well spent? Three facts suggest not:

  • Our own interviews with 100+ Sales & Marketing executives confirm that 85-90% of leads generated by Marketing are never followed up by Sales
  • The average tenure of US enterprise CMOs is 18-24 months. CMOs are the C-level function with the highest turnover
  • Third party studies (e.g., www.cmocouncil.org) regularly point to marketing performance optimization as a top 3 marketing pain point

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Making Advertising Work On The Other (Non-Search) Part Of The Web

June 3, 2008

MAKING DISPLAY ADS RELEVANT

Just about everyone knows advertising on the Web, outside of search, isn’t living up to expectations. Advertisers and publishers buy and sell inventory of display ads for CPMs (cost per thousand impressions) well below the offline equivalents in magazines, newspapers, and tv. Part of the reason is that outside of search, the Web hasn’t found its equivalent of the 30 second spot or the two page spread (an insight courtesy of John Batelle). But a major part of the reason is that Web sites can’t consistently serve up relevant and engaging ads to an audience that’s no longer captive. So how do we substitute relevance for the more traditional reach to increase ad prices?

For years users have left “breadcrumbs” about their interests across the Web. Now there are increasingly sophisticated ways to connect that information into rich profiles, much of it by user choice, while still respecting privacy concerns. The consolidation and massive reach of ad networks in the hands of Google, Yahoo, and Microsoft likely means that most of the economic rewards of this shift will continue to accrue to these companies. Even if the traditional media giants accelerate their migration to the Web, they are likely too late. They won’t be able to match the reach of the tech giants’ online ad networks and their trove of online personal profiles.

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