Plunging ad prices underscore doubts over Yahoo turnaround plan

SAN FRANCISCO Tue Jul 16, 2013 11:26pm EDT

Marissa Mayer, President and CEO of Yahoo, answers questions during the Reuters Global Technology Summit in the Thomson Reuters offices in San Francisco, California, June 20, 2013. REUTERS/Beck Diefenbach

Marissa Mayer, President and CEO of Yahoo, answers questions during the Reuters Global Technology Summit in the Thomson Reuters offices in San Francisco, California, June 20, 2013.

Credit: Reuters/Beck Diefenbach

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SAN FRANCISCO (Reuters) - Marissa Mayer's plan to resuscitate Yahoo seems a simple one: get back the eyeballs, sell more ads and charge higher prices. But the chief executive's plan seems to have run into a major snag.

The price the company charges per ad slid 12 percent in the April to June period, six times the decline just a quarter ago - a fall that some say highlights how Yahoo has been caught unprepared for the industry shift to automated, programmatic ad buying.

Marketers increasingly prefer to buy online advertising space through automated exchanges, where prices are significantly lower, rather than paying top-dollar for premium ads sold by a Web publisher's salesforce. Ads offered by exchanges also allow marketers to aim ads in real time at specific audiences, such as by gender or age.

Yahoo's ad focus has, however, centered on "on developing media units that were much better for premium buys," said Shar VanBoskirk, an analyst with industry research firm Forrester Research.

Yahoo has its own programmatic ad technology with its Right Media exchange. But analysts say the exchange is not as popular as rival offerings, such as Google's DoubleClick exchange, which is considered the industry standard.

Google, the world's No.1 Web search engine, will report its second-quarter earnings on Thursday.

For many on Wall Street, the industry shift is one more reason means Yahoo's turnaround remains "an open question", especially given that Mayer has said the company remains first and foremost an advertising company.

During Tuesday's post-earnings conference call with analysts, Mayer said Yahoo was bullish on its advertising technology and that it planned to focus on improving various aspects of it in the coming quarters.

But even if Yahoo's ad exchange becomes more competitive, the broader trend of programmatic advertising will continue to pressure its business.

"Programmatic advertising technology continues to have a downward bias to pricing in display advertising and I don't expect that to improve anytime soon," said UBS analyst Eric Sheridan.


Mayer took the reins at Yahoo in July 2012 after a tumultuous period in which the company churned through several CEOs and many of its top executives and engineers jumped ship.

She has revamped key products such as mail and the Yahoo home page and jumpstarted acquisitions. Last month, Yahoo closed its $1.1 billion acquisition of popular blogging service Tumblr.

Yahoo's stock has surged roughly 70 percent since Mayer took the helm but much of the gain has come from stock buybacks and from Yahoo's Asian assets, including a 24 percent stake in Chinese e-commerce giant and potential IPO debutante Alibaba Group.

Ad numbers, however, remain dismal. Apart from pricing, display ad volumes and paid-clicks for search ads - an important measure of viewers and readers' responsiveness to marketing - continue to shrink.

Yahoo's share of the $17 billion U.S. display ad market is expected to decline to 7.9 percent in 2013, down from a 9.2 percent share last year, while Google's share is expected to grow to 17.6 percent. Facebook is likely to expand its market share to 16.5 percent, research house eMarketer estimates.

"This core business is going to be ugly for quite some time before it gets better," BGC analyst Colin Gillis said of Yahoo.

"This is just the beginning of the trend, of the drop in the price per ad. You still have a pretty big gap between what you can get direct and what you can get selling on an exchange."

(Editing by Edwina Gibbs)

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Comments (3)
SanPa wrote:
Well, I resent the new email having never been enthusiastic about the prior version change. And, I went to Tumblr for a looksee, but saw nothing that turned my fancy. As to advertising, I’ve learned to ignore it. And the fits and starts for iPad specific pages … A turn off. Multiply my experience by, and you have a lot of very uncooperative users.

Jul 16, 2013 12:35am EDT  --  Report as abuse
ChicagoFats wrote:
Users (and the content presented to us) mean nothing to Yahoo except as eyeballs and clicks. And the trend to automated ad exchange buying leads me to believe that the clicks don’t even matter that much. I have seen an increase in popup, popunder, and rollover ads in the last year. They’re making it as hard as they can to avoid seeing those ads, figuring that if one user in a (thousand? million? who knows?) clicks on an ad, whether intentionally or accidentally, it’s worth the money it cost. Sort of like bulk mail, which appears to be disappearing as the internet fills up with junk ads.

Jul 17, 2013 1:24am EDT  --  Report as abuse
XDC wrote:
Adblockplus….. Donottrackme….. Noscript……

No ads to view…. priceless.

Jul 17, 2013 10:46pm EDT  --  Report as abuse
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