Xoogler Under Pressure: The Yahoo Soap Opera Renews for Another Quarter
July 16, 2014
When Chris Kitze and I started The Point (Top 5% of the Internet), we admired the Yahoo Directory. Our goal was much narrowed than Yahoo’s. We focused on putting Web sites in the Point directory that meet our criteria for family friendly and young student friendly sites. That was in 1993 or 1994. The site was a hit and we sold the company to CMGI, and the Point ended up at Lycos. That deal was pretty successful for me, and I learned three things in the wild and wooly, pre crash Internet era 20 years ago.
First, selling ads was difficult. In the early days, there were no solid guidelines for how big an ad could be. Blinking and flashing were annoying, but there was not user backlash with these lame attempts to attract attention. Proving from log data who clicked and other details required scripts and machine resources to grind through the huge files our Sparcs happily pumped out. I learned that ads were indeed good money. But the 1993 Internet required our team to be the digital equivalent of Roman trireme rowers. I don’t recall much time off, and it was hard work.
Selling ads is hard work. The landscape is altered by the process. There’s no guarantee there’s gold in them thar riverbeds. Source: http://bit.ly/1wuH5ef
Second, advertisers were reluctant to pay up front. A problem Google solved with its “account” method. We were stupid. We sent an invoice, the usage data, and waited for the check to come in the mail. Basic lesson: collecting for any online service can be difficult. When times are tough, advertisers shuffle priorities and our invoices filtered to the bottom of the stack. Collections were painful.
Third, making pages in 1993 was a time consuming affair. We experimented with many technologies, toolkits, and even systems like the incredibly sluggish Cold Fusion were tested in 1995. We learned that the best way to create Web pages in the early 90s was to code ‘em up, shake ‘em out, and let ‘em loose. I repeatedly asked myself, “Why did I agree to put resources into a family friendly online service?”
I read two “real” news stories this morning. Neither has been connected in the blog posts and news streams flowing into my Oversight service. Let me point to each and then offer a handful of observations. I would suggest you keep the three factoids I learned from the Point (Top 5% of the Internet) start up.
The first item is “Yahoo Misses In Q2 With Revenue Of $1.04B, EPS Of $0.37.” At a time when newspapers and magazines are gasping for oxygen, Yahoo seems to have no turbocharger to activate. One Alibaba follows its dream, Yahoo has only its in hand properties and acquisition opportunities to produce another Klondike Gold Rush. The write up said:
Yahoo reported its second-quarter financial performance, including revenue (excluding traffic acquisition costs, or TAC) of $1.04 billion and non-GAAP earnings per share of $0.37. Revenue including TAC was $1.08. Analysts had expected the company to earn $0.38 on revenue of ex-TAC of $1.08 billion.
The quote to note about Yahoo earnings is:
The company stated in its release that revenue growth is its “top priority,” and that it is “not satisfied with [its] Q2 results” in that context.
The second reports presents some good news for Microsoft. True, the write up does not mention the impending layoffs or the dismal device market share that this former monopoly now has. “Microsoft to Surpass Yahoo in Global Digital Ad Market Share This Year.”
Unlike some “experts” I view information about online advertising with considerable skepticism. I don’t think the individual numbers presented an “facts” are important. What struck me as important is this statement:
Yahoo’s push to maintain its position as a top global ad seller will take another hit in 2014, according to new projections from eMarketer. Though Yahoo’s ad revenues will be back in the black this year, increasing its global digital ad revenues by 2.7% after a decline of 2.1% in 2013 to reach $3.53 billion, the company’s share of the $140.15 billion digital advertising market will fall from 2.86% to 2.52%.
Microsoft—believe it or not—appears to be doing better than Yahoo in the ad battle.
The big point in my opinion is that Yahoo has racked up falling ad revenue and will continue to lost online advertising market share, not because other vendors like Microsoft are doing a bang up job. I seem to recall that the Xoogler running Yahoo saw only happy faces in the revenue a few months ago. Like IBM’s slowing arcing down numbers, Yahoo appears to be riding a fading wave.
Several observations:
- Xooglers do not automatically generate money. In fact, Google’s revenue comes from its magical online search results ad system. (Anyone remember GoTo.com and Overture?) I bet Yahoo does.
- Selling online advertising is as difficult today as it was in the era of The Point (Top 5% of the Internet). Google’s approach relies on advertisers who will deposit money to be spent, so some of the collection hassle is ameliorated.
- Yahoo has been in turn around mode for a long time. Maybe AOL and Yahoo should get married and produce fat, happy revenue.
Now about the Yahoo search system. I find the results less than satisfying. I can’t figure out how to look at Louisville-related news. I continue to have difficulty logging into my for fee Yahoo mail account when I am out of the country. I suppose I am the Lone Ranger in my view of Yahoo. That’s okay but I see declines as due to more users than myself.
Stephen E Arnold, July 16, 2014
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