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Will Yahoo's Panama Deliver? 
By: Mr. Frog 2006-12-19 Poor Yahoo. For a company that survived the bursting of the dot com bubble, had the largest Internet audience for most of 2006, and boasted a $3.16 billion gross profit over the last twelve months, they've taken quite a vicious PR beating.
Yahoo has fared poorly in financial analyst's comparisons with search's gleaming poster child Google, causing their stock to plummet almost 36% since this time last year. First, a decrease in advertiser's online display budgets caused them to reduce this year's Q3 earnings projections. Then, the now infamous "Peanut Butter Manifesto" exposed some of their organizational dirty laundry, and the ensuing re-org left many shareholders still doubting. Out of this morass of negative publicity was supposed to emerge a hero. Its name: Project Panama. Its goal: to make Yahoo's SEM better than Google's. The hype surrounding Panama's release has been deafening. But now that it's open to the public, will it live up to expectations? On the surface, Panama has definite appeal to advertisers. The advanced copy and landing page testing capabilities, along with geotargeting and dayparting options, will allow marketers to squeeze better results out of their campaigns. The hybrid-style auction will allow savvy advertisers, particularly brands with recognizable and trusted domains names to boost their predicted clickthrough rate, (similar to Google's quality score), increasing their ad's position at the same, or lower CPCs. However, there is a downside to this for them-a dramatically increased workload. The old Yahoo Sponsored Search platform was simple, you pay one penny more, you get a higher position. There wasn't any fancy stuff like geotargeting and dayparting, at least not through the Yahoo DTC interface. Fancy campaign management had to be executed through third party campaign management solutions with access to the Yahoo APIs. Continuing to do more of the fancy stuff and doing it right will require a lot more work. A greater percentage of advertisers than ever before will find themselves in dire need of a robust automated technology to really succeed, as well as keen analytics. In addition, advertisers will have to learn how to create and execute the sophisticated strategies suggested by analysis of their campaign data. Nonetheless, look for Panama to steal some of Google's advertising dollars. Point one for Yahoo. However, when you consider market share as judged by search query volume, Panama won't make any difference. Is the average searcher even going to know, much less care, that Yahoo is selling keywords in a hybrid auction? Maybe this is just me, but I don't see Joe User saying to Mrs. User: "Honey, Yahoo allows it's advertisers to do geographic segmentation and the local results have been improving. Let's use them instead of Google for our Christmas shopping!" Yahoo has its users and Google has its users. Some consumers use both, but Google has a much stronger brand than Yahoo when it comes to search. While Panama may eat into Google's share of advertising dollars, don't expect it to even make a dent in Google's query market share. Google's got a stranglehold on the lead in query volume, and ultimately, Google tends to get the benefit of the doubt when similar opportunities are available and the budget needs to go one way or the other. Point one for Google. So if Yahoo's goal is to be competitive with Google, the only way to really cut into their market share is through a full-on media campaign that supports its move to make both paid and organic results as relevant as possible. Here's an interesting statistic: in 2005, Google spent just under $500 thousand on sales and marketing. Yahoo spent over twice as much, at just over $1.02 million. These stats come with some caveats, as they don't show whether the marketing was targeted to users or advertisers, nor do we know if Yahoo was promoting search or its other properties. Nonetheless, they paint a broad picture of the two rivals' differing situations. Google is able to spend less money promoting itself and still retain a larger market share based purely on the strength of its product. Yahoo is already spending more money than Google promoting itself and has a lower market share. To steal some of Google's eyeballs, Yahoo will be forced to spend even more money promoting itself, or develop some kind of viral campaign that convinces more users to switch. Meanwhile, Google will have extra resources to devote to improving and expanding its product. Score: Google two, Yahoo one. Yahoo is clearly the underdog, but it's premature to say game, set, match Google. It's pretty clear that Panama on its own won't save Yahoo. Other heroes will have to emerge from the morass, such as a CPC based behavioral search targeting solution for Yahoo's ads (Project Guatemala, perhaps?) and demographic targeting for both search and display ads. For the immediate future, look for Yahoo's increased revenue from Panama to make shareholders happy starting around Q2 of next year. Beyond that, Yahoo still has an uphill battle to steal Google's market share, and marketer's dollars. Tag: Yahoo, Panama Add to  Del.icio.us |  Digg |  Reddit |  Furl
Have a bookmark! -  About the Author: Mr. Frog is a leading Search industry visionary. Mr. Frog is a member of the Did-it Search Marketing team which accompanies him to most major marketing conferences. |
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