Try Again, Yahoo!

By Rick Aristotle Munarriz | More Articles
February 20, 2009 | Comments (4)

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Yahoo! (Nasdaq: YHOO ) isn't standing still.

The meandering Internet portal is rolling out Rich Ads in Search, a product to help advertisers get noticed before the lucrative search engine audience. The ads are called "rich" because we're talking about rich media here. Sponsors will be able to insert graphical, interactive, and even video ads into Yahoo!'s query result pages.

Unfortunately, they're not called "rich" because they will make Yahoo! shareholders rich.

It's easy to see why Yahoo! is pumped.

"A small group of advertisers tested it in the fourth quarter of 2008 and saw click-through rates rise by as much as 25 percent," claims the Yahoo! blog introducing the new feature. "They've also seen improved brand exposure and conversion rates."

Increased clicks? Higher conversion rates? These are sweet metrics for a Web company that relies on delivering leads. Unfortunately, there are several reasons to hop off the Giddy Express before it pulls into Ho-Hum Station.

The beauty of paid search is that even the smaller advertiser can peck out a few lines of copy and have an ad running on ideal keywords immediately. Many of these advertisers don't have the skills or the means to outsource the development of sticky display ads.
The beta testers may have had solid initial results, but we all know how ad blindness kicks in after the novelty wears off. When's the last time you clicked on a banner ad?
True to its name, the "Rich" sponsors may scare away the poor ones, fearing that local advertisers have an uphill battle to get noticed pitted against branded eye candy. They'll just flock to search engines that appear to have a more level playing field, like Google (Nasdaq: GOOG ) , Microsoft (Nasdaq: MSFT ) , or IAC's (Nasdaq: IACI ) Ask.com.
Display advertising itself hasn't been much of a life preserver. Just ask ValueClick (Nasdaq: VCLK ) , trading for less than a third of its 52-week high.
How about the user experience? If searchers know that their queries on Yahoo! will get bogged down with distracting graphical ads, won't they just take their searches elsewhere?

This does not mean that Yahoo! should stop trying. When you're a stagnant company, you have little to lose, especially with a new CEO at the helm.

Keep those feet moving, Yahoo! -- only next time, move them in the right direction.

Yahoo!'s tapping the snooze bar:

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Microsoft is a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz is a fan of Yahoo! and Microsoft, but not of bad weddings. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Read/Post Comments (4) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

Report this Comment On February 20, 2009, at 1:21 PM, ikkyu2 wrote:

The Fool's disclosure policy is usually pretty good, but shouldn't it point out that the Fool is owned by Yahoo!, making Mr Munarriz technically a Yahoo! employee?
Report this Comment On February 20, 2009, at 1:51 PM, dangerdanger wrote:

Display is not dead my friend. Do you know that a combination of search and display advertising drives the highest ROI for advertisers (versus running search or display by themselves)????? Upwards of 20% and higher in many cases. So why wouldn't advertisers want to run a banner ad or video ad next to their search ads? Makes perfect sense based on the search and display combo studies of the past 3-4 years. Apparently results are already proving to be positive in this Yahoo study.
Not to mention, advertisers expect to spend more on email, search, and display in the year ahead...
Datran's third annual survey of over 3,000 top marketers reveals 80.4% still feel email tops the list in terms of effectiveness for their company, followed by search (56.8%) and display (42.1%), reports MarketingCharts.
These tactics continue to outpace offline media, direct mail and mobile as the strongest performing advertising channels.
Correspondingly, marketers plan to allocate their available 2009 budgets toward email, search and display. They also anticipate at-pace or reduced spending across offline advertising and direct mail, Datran said.
http://www.marketingvox.com/email-search-display-show-strong...
Report this Comment On February 20, 2009, at 2:11 PM, foolishmfdoom wrote:

ikkyu2, motley fool is not owned by yahoo. get your facts straight before chiding Fool. Yahoo is just one of many of their partners.
No one said small companies can no longer type up some simple copy to go with their paid listing. But if those are less effective, someone will step in and help them. Companies that find added value from the added rich media will pay more for the increased click through.
Report this Comment On February 20, 2009, at 4:56 PM, XQUESTOR wrote:

YHOO and EBAY should do a merger.

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