7 Min Read
By Jennifer Saba and Alexei Oreskovic
NEW YORK/SAN FRANCISCO, Oct 14 (Reuters) - Three weeks ago, Yahoo Inc Chief Executive Marissa Mayer strode into a Manhattan hotel and was greeted like a rock star by hundreds of advertising executives who snapped pictures as she sat down for an interview with journalist Charlie Rose.
That same audience a year ago would have been grousing that Mayer had not done enough to engage Madison Avenue, which is arguably Yahoo's most important constituent since the Internet company derives more than 75 percent of its revenue from ad sales.
"I think that Marissa has gotten a bit of a bad rap," said David Cohen, the chief media officer at UM, the global media arm of Interpublic Group.
The industry perceived Mayer as not caring about advertising, choosing instead to focus solely on products, Cohen said.
Ad agency executives say that over the past six months Mayer and her team have been working hard to change that perception, courting advertisers at key industry events, hosting lunches and attending meetings with agency representatives that include Yahoo excutives like Chief Operating Officer Henrique de Castro, Senior Vice President and head of Americas Ned Brody and Chief Marketing Officer Kathy Savitt.
The charm offensive has impressed many on Madison Avenue, but getting advertisers to actually spend more on Yahoo's Web properties will not happen overnight, industry experts said.
The shift to advertising exchanges, which allow marketers to instantly buy placement for their ads across a broad constellation of websites, has pushed down the prices that online publishers such as Yahoo can charge.
That was painfully apparent in the second quarter of this year, when Yahoo's display advertising revenue slid 11 percent due in part to a double-digit decline in ad prices.
"Advertisers will become more excited if there's clear evidence that Yahoo is growing again in terms of its users and its engagement," said Mark Mahaney, an analyst at RBC Capital Markets.
Since Mayer became CEO, Yahoo's stock has more than doubled, recently reaching a near 8-year high of $35.06. But analysts say the gains are mostly due to aggressive share buybacks and the impending initial public offering of Chinese e-commerce giant Alibaba Group, in which Yahoo owns a 24 percent stake.
More than a year into Mayer's tenure, Yahoo's core business remains stagnant. Revenue has been flat or down for the past four years and Wall Street does not expect the situation to improve when Yahoo reports its third-quarter results on Tuesday.
Analysts are expecting third-quarter revenue to decline around 1 percent to $1.08 billion, according to Thomson Reuters I/B/E/S.
A Yahoo representative said the company has built a team to specifically focus on agency relationships and has recently realigned its sales force according to industry expertise.
Yahoo is "working closely with our advertisers to develop opportunities in a more integrated way across our full suite of media, programmatic, video and mobile properties," Yahoo said in an emailed comment.
Yahoo is trying to play catch-up to Facebook Inc, Twitter Inc and Google Inc in the fast-growing mobile advertising business, as consumers increasingly access the Web on smartphones instead of PCs, and flock to social media websites that require novel ad formats.
Spending on mobile ads grew 145 percent year over year to $3 billion in the first six months of 2013, according to the Internet Advertising Bureau.
Mayer has revamped many of Yahoo's mobile apps to make them more attractive to consumers and advertisers. In May she spent $1.1 billion to acquire Tumblr, a popular blogging and social media website.
"There's a promise there but it's not ready for prime time today," said Ritu Trivedi, managing director, digital marketplace at MediaVest, a Publicis media agency, referring to Yahoo's mobile ad efforts.
Mayer has said that turning Yahoo's business around will be a multi-year process. She has accelerated the pace of product development, and added workplace perks such as free food and top-of-the-line smartphones for employees.
But even as the CEO tries to forge closer ties with advertisers, she has made it clear that Yahoo's users come first. That is a big change from the old Yahoo, which was famous for loading its websites with advertising that critics said were overly intrusive and detrimental to the user experience.
For instance, Yahoo's new mobile weather app, which takes basic weather feeds and links them with the Flickr photo-sharing service, has sparked interest from advertisers. The app could be particularly appealing to hotel and retail marketers, said Peter Stein, CEO of Razorfish, a digital marketing agency.
So far however, Yahoo has kept the weather app ad-free.
"Their message has been very direct and on point; they are definitely focused on the consumer," said Ari Bluman, chief digital investment officer in North America for WPP's media buying arm GroupM.
Some ad experts say Mayer's prioritization of users before advertisers is a smart move that could ultimately pay off by increasing Yahoo's popularity with consumers. But others say it may not go over well on Madison Avenue in the short term.
For instance, Yahoo did a major overhaul of its popular sports home page to coincide with the start of the NFL season this year. One advertising agency executive said they found out about the change a week before the launch, and so the agency had to scramble to re-design ads that would fit with the new format.
"Our client was very upset," said the executive, who did not want to be identified because the agency works closely with Yahoo. "I have a six-page typed memo about the problems we had with Yahoo and this one client."
A Yahoo representative said that the company has "moved faster in the past year than anytime in our recent history" to launch better products and to "evolve" the ads on its websites. "We think this will improve performance for our advertisers over time, and we're working closely with our advertising partners."
Still, the overall assessment of Mayer is positive.
Tamara Bousquet, senior vice president of media at digital marketing agency DigitasLBi, recalled a dinner she attended in late September with other advertising executives where Yahoo was the topic of conversation. "Every single person around that table thought the company was handled better since Marissa came on board," she said.