If you have listened to the financial news reports it seems like Google can do no wrong. Google is gaining praise for their acquisition of YouTube, Google’s earnings are through the roof, online ad revenue is accelerating , the stock price is soaring, etc… Everything seems to be going right for them.

Google To Acquire YouTube for $1.65 Billion in Stock

Google: Next stop $500?

So why not Yahoo!?

Again if you read the news you see:
Yahoo! profit falls 37%; net sales up 20%. Yikes!

So what’s going on over at Yahoo!? We all know internet advertising is growing by leaps and bounds, and while Yahoo! might be losing a slight amount of search market share as a percentage, their search volume is still rising as more and more people come and line and embrace search engines. So shouldn’t they be ok?

I believe Yahoo!! has totally missed the mark. Somehow, someone in the media spun this idea that Yahoo!’s new search interface, code named Panama, will revive Yahoo!’s slumping ad revenue.

The fact is this, the good, key online advertisers base their advertising spending on ROI, not on the interface that they use to manage their advertising account. Advertisers want better quality traffic more than they want a new interface.

I will applaud Yahoo! for moment, the Panama upgrade is a great step, in a direction they should have taken a long time ago. Panama however does not solve the largest problem of all which is Yahoo!’s atrocious ad distribution partner network. Yahoo! has many smaller, less-known partner websites that display ads purchased by Yahoo! advertisers. While many of these partners are very legitimate, some of them employ less than ethical tactics to solicit low quality clicks on ads that generate revenue and pay a commission to them, at a cost to Yahoo!’s advertisers. Yahoo! knows this but probably depends largely on the additional revenue from these partners. This is and has been eroding the ROI that Yahoo! can provide to it’s advertisers for a long time. Unlike Google, Yahoo! does not let advertisers opt out of their partner network and only run ads on Yahoo!.com.

If Yahoo! made this one simple change I, and many thousands more pay-per-click marketers would immediately allocate a much larger part of our advertising budget toward Yahoo! than they currently do. This one change would have a far greater, and more immediate impact on the bottom line than Panama will. This feature, or ability to opt-out of the Yahoo! partner network will not be part of the Panama upgrade, however, I was told directly from a Yahoo! rep that they are looking at adding a feature that would allow this in the future. Of course the ETA on that was TBD.

Good luck Yahoo!, we’ll be back to advertise just as soon as we can choose to opt-in and out of partner websites.

This entry was posted on Friday, October 20th, 2006 at 10:52 pm and is filed under Search Engines. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.