Wednesday, October 18, 2006

Yahoo Launches New Search Ad Platform

Yahoo Launches New Search Ad Platform
by Mark Walsh, Wednesday, Oct 18, 2006 6:00 AM ET
YAHOO CEO TERRY SEMEL ANNOUNCED Tuesday that the company's long-awaited new ad-serving platform, known as Panama, had gone live.

Semel, who made the announcement during a conference call discussing third-quarter earnings results, said that the company had started asking U.S. advertisers to switch to the new system, and that it would invite more to upgrade through the early part of 2007.

The announcement was consistent with Yahoo's previously stated plans to roll out Panama's "front-end" in the fourth quarter before launching the "marketplace design" part of the platform, which allows for particular ad tailoring functions to be introduced in the first quarter of 2007.

"We believe that through this platform we will be able to unlock the full potential of our large global user base and improve our search monetization capabilities," said Semel. The news of Panama being unveiled on Tuesday helped to push Yahoo's stock up nearly 3 percent to $24.83 in after-hours trading.

Overall, however, Semel said he was not satisfied with Yahoo's third-quarter financial performance, and that the company was "committed to doing better." Yahoo in September said that third-quarter revenue would fall within the lower half of previous estimates, due to softening ad revenue in the auto and financial services sectors.

Yahoo missed Wall Street's quarterly revenue target of $1.14 billion--reporting net sales of $1.12 billion, excluding the money it pays to search-advertising partners. The company had a profit of $159 million, or 11 cents a share--in line with analyst expectations. In the year-earlier period, Yahoo reported net income of $254 million, or 17 cents a share.

The Internet giant also estimated fourth-quarter revenue of $1.15 billion to $1.27 billion, falling below the Wall Street target of $1.31 billion. Yahoo expects that "industry-specific" problems experienced by advertisers in the auto and financial services segments will continue to affect ad sales during the quarter.

The successful rollout of Panama in the coming months may be the biggest factor influencing Yahoo's rebound from slowing ad sales and heightened competitive pressures. "It's definitely good for them," said Greg Sterling, principal analyst with Sterling Marketing Intelligence, of the new ad platform launching. "The interface that they've created is much more graphical and user-friendly." He added that Panama was also more flexible, enabling Yahoo to more easily release subsequent versions as needed.

But any financial impact from the phasing-in of Panama shouldn't be expected until the second quarter of 2007, warned Yahoo Chief Financial Officer Sue Decker.

In addition to Panama going live, Yahoo earlier in the day had announced two other corporate moves to help garner more ad revenue: the acquisition of rich media ad company AdInterax and a 20 percent investment in online ad exchange Right Media (see related OnlineMediaDaily story). Semel said that the deals would help Yahoo to expand and improve its ad offerings during a transition period as new forms of advertising and new competitors emerge online.

Facing challenges from rivals such as Google and MySpace, Semel stressed that Yahoo was focusing on strengthening its offerings in the areas of social networking, video and mobile communication. Saying that Yahoo was a "far bigger player" in social networking than generally believed, he noted its acquisition of Web 2.0 companies such as Flickr and in the last year. He said that Yahoo would continue to be a key player in the field.

With regard to video, Semel pointed to Yahoo's recent deals with Al Gore's CurrentTV and CBS's local TV stations as examples of where the company is headed in terms of expanding its video content. He also noted Yahoo's purchase last month of JumpCut, which makes online video-sharing and editing tools, as an expansion into both social networking and video. Meanwhile, Yahoo Video was the company's fastest-growing property in the last year--averaging 5.6 million unique visitors during the third quarter of 2006, compared to 1.6 million for the year-earlier period, according to AdRelevance, a unit of Nielsen//NetRatings.

In the mobile realm, Semel predicted that the company's Yahoo Go platform for mobile will be available on a majority of cell phones worldwide in the next 18 months.

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