Yahoo to transform Web ads with new system

NEW YORK Wed Sep 24, 2008 7:56pm EDT

Jerry Yang, Yahoo CEO and co-founder, speaks at a keynote address at the Consumer Electronics Show (CES) in Las Vegas, Nevada January 7, 2008. REUTERS/Rick Wilking

Jerry Yang, Yahoo CEO and co-founder, speaks at a keynote address at the Consumer Electronics Show (CES) in Las Vegas, Nevada January 7, 2008.

Credit: Reuters/Rick Wilking

NEW YORK (Reuters) - Yahoo Inc's chief executive said his company's new system will make Internet advertising cheaper and easier for publishers and advertisers.

Yahoo Chief Executive Jerry Yang told Reuters in an interview that publishers and advertisers would benefit from a more efficient process that would allow them to sell their products and services on more than one website at a time.

Yang said the system, called APT, would be much simpler than the current process of selling banner ads through hundreds of websites --a time-consuming model with roots in traditional media like television and newspaper advertising.

"This system allows cross-selling between sales forces, it allows us to have visibility of what pricing is happening and where," said Yang, who added the system could transform the online Web industry's inefficiencies in selling ads.

Yahoo is hoping to build a system as efficient for online display advertising as the one run by Google Inc (GOOG.O) in search advertising. Google's market-leading search advertising sales system is largely automated via an auction bidding process.

The U.S. Justice Department is currently looking into whether a commercial tie-up between Google and Yahoo, which together have 80 percent of the search market, would violate anti-trust law.

FIRST PARTNER

Yahoo's first APT partner will be the nearly 800 newspaper websites of the Newspaper Consortium which includes MediaNews Group.

It will start to roll out APT in the fourth quarter, and from early 2009, will place Yahoo's own inventory on the system as well as other publishers and advertisers.

Ben Schachter, analyst at UBS said Yahoo's rivals are working on similar plans.

"Given Yahoo's scale and position as the leader in online display advertising, it is Yahoo's position to lose," Schachter said in a note to clients. "The problem is, given Yahoo's execution history over the past few years, we are afraid that they could lose it."

Yahoo, which has had a turbulent year since Microsoft Corp (MSFT.O) made a $41 billion takeover bid for the Web portal in February, signed a search advertising agreement with search giant Google in June.

"The advertising strategy at Yahoo is about building platforms for publishers and advertisers and our second strategy is about opening things up for multiple sales forces and multiple pieces of inventory," said Yang.

"We're trying to do the same with Google."

Yahoo said in June it agreed to let Google place search ads -- advertisements placed next to search results -- on its site in what it called an $800 million annual revenue opportunity that would boost cash flow by $250 million to $450 million in the first 12 months.

(Editing by Leslie Gevirtz)