Motley Fool Stock Advisor pick Yahoo! (NASDAQ:YHOO) sent its chief sales officer, Wenda Millard, to discuss the company's strategic vision at the recent UBS Media Conference. The company outlined some exciting initiatives, but also left me concerned about the diverging strategies of Yahoo! and archrival Google (NASDAQ:GOOG).

Despite the general market concerns that Yahoo! was losing its edge, Millard reiterated that her company continued to grab market share from Time Warner's (NYSE:TWX) America Online and Microsoft's (NASDAQ:MSFT) MSN in the latest quarter. She also noted that Yahoo! was making some headway in behavioral marketing. That tactic might have a slow adoption rate, but it could be a differentiator between Yahoo! and rivals if behavioral marketing ultimately provides more targeted, response-driven ads. Millard was also positive about the potential for "rich media" ads incorporating video and Flash animation. Such ads create better pricing power and have already gained legitimacy with advertisers, providing Yahoo! with a powerful weapon against Google's strength in text-based ads.

I was struck by the extent to which Yahoo! has been transformed into a mass-media company; I shouldn't have been surprised, given CEO Terry Semel's roots at Time Warner. Millard estimated that 60% of her business now comes from media agencies, up from 20% when she first joined. She further noted that the company's biggest competitors are broadcast networks, not competing search engines.

An old-school success
While Google seeks search superiority through high-tech algorithms and fancy technology, Yahoo! seems more like a Madison Avenue stalwart, with a hefty audience that lets it cozy up to established blue-chip advertisers. Millard laughed off the suggestion that advertising would one day be sold primarily in an auction model, noting that her Fortune 1000 companies needed the kind of complex and sophisticated advertising campaigns that technology could never supplant. In response to allegations that Yahoo! was losing employees, Millard also noted that "a real media person doesn't want to go to a company that values, above all else, science and technology."

Although traditional advertising is certainly a huge market, one that's basically made Yahoo! into the successful company it is today, it'd be nice if Yahoo! could hedge its bets a little better. Millard acknowledged that the company needed to do a better job monetizing "non-premium" content (the type not derived from those Fortune 1000 firms). To that end, Yahoo! is changing its incentive structure and investing in ad-exchange network Right Media. Millard didn't provide much detail on Project Panama, Yahoo!'s planned answer to Google's search-advertising prowess; then again, it's not really her area of expertise.

It's clear that Yahoo! and Google are pursuing drastically different paths. Yahoo! seems to have the upper hand in terms of providing a mass audience for mass-market advertisers, while Google seems to be a more effective means for smaller advertisers to reach a much more focused group of customers. I can't pick a winner now, but it ought to be an interesting fight.

For related Yahoo! Foolishness:

Yahoo! and Time Warner are Motley Fool Stock Advisor recommendations. To see what other picks have contributed to the newsletter's market-crushing returns, take a free 30-day trial today.

Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates comments, concerns, and complaints. Microsoft is an Inside Value selection. The Motley Fool has a disclosure policy.