Internet Outsider

Meet the New Yahoo!... Same As The Old One?

Good news and strange news.  Good that Terry went gracefully and (as he put it) "sooner rather than later."  Strange, though, about Jerry taking over as Terry's apparently permanent replacement. 

I like and admire Jerry greatly, and his passion and leadership has been invaluable to Yahoo over the past 13 years.  He also knows the Internet business cold.  To my knowledge, however, Jerry has never had an operating management role of any kind, not even at the working-group level.  And he's now assuming command of a global Fortune 500 corporation.  (Management experience ain't everything, but it's something).

Valleywag assumes the appointment is temporary, but the press release sure isn't written that way (If the intent is temporary, why not say so?).  Also, once again, the new management responsibilities are carved up in a bizarre multi-fiefdom fashion, in which Sue has control over the "business" and Jerry over "technology."  Perhaps someone can explain how Yahoo's business can be separated from its technology?  How can Sue drive the business without having control over the technology?  How can Jerry make technology decisions without controlling the business?  What is going on here?

Here's what I hope is NOT going on here.  I hope that Yahoo's board is not simply incapable of making clean, crisp decisions.  The bureaucracy thing has plagued Yahoo for years, and it seems as though it might continue to do so. In my mind, the most sensible arrangement would have been Jerry as Chairman and Sue as CEO and the heck with all this fiefdom crap.  Sue has run a big percentage of the company for years, and she ran a division at DLJ before that.  If Jerry's role is going to be largely inspirational and visionary (which Lord knows the company needs), then in my mind he should be Chairman, not CEO.  But perhaps there's some method to the strangeness that someone can enlighten me about.

In any case, thanks again to Terry for six years of service and a gracious exit, and long live the new Yahoo!

UPDATE:

I gather they smuggled a second-half earnings whiff into the conference call.  Well done.  Terry's leaving in the nick of time...

Shot Heard Round the Yahoo

(We hope...)

Activist Eric Jackson and other frustrated Yahoo shareholders won big at the Yahoo! Annual Meeting yesterday, even though the company's recommended slate of directors still passed.  Persuading nearly a third of normally rubber-stamping shareholders to vote AGAINST management is a major success, and one can only hope that Terry got the message. 

Terry's remaining supporters usually point to the stock's having gone up a lot since he joined the company and suggest that Yahoo's current woes are merely a temporary lull that all good companies go through.  This defense ignores that the average stock in the industry is up a lot, too (NASDAQ has doubled), and that a competitor that barely existed when Terry joined the company is now worth 5 times as much as Yahoo. 

Yahoo's failure to maintain its lead in search and instead concentrate on more traditional media efforts was a colossal strategic error that Yahoo's shareholders will forever have to pay for.  Everyone makes mistakes, of course, and Terry's experience helped Yahoo through a challenging period after the dotcom crash.  The skills required to return Yahoo to Internet greatness now, however, are different than those that helped stabilize it in the bust. 

Terry believes he has the Internet-greatness skills, and he's certainly been paid as though he does.  Despite his confidence, however, every day that goes by sees Yahoo fall further and further behind.  So no wonder a growing number of shareholders think it's time for a change.

Dear Zod: Yahoo's Tech Guru and Group Head Quits

I suppose it's possible he was pushed (anyone know?), but as John Battelle observes, his departure means that only one of Yahoo's three new organizational groups has a leader.  Given that the re-org was designed to streamline the company, reduce bureaucratic stagnation, and light a fire under the place, it's hard to imagine how these vacuums help.

Perhaps Valleywag is right and Yahoo insider Jeff Weiner will get the "Audience" job.  That will take care of one of the two vacancies.  But unless a strong successor to Zod Nazem is immediately forthcoming, one of Yahoo's biggest problems--constant turnover in the tech ranks--will be even farther from being solved.

Map Wars: Google and Microsoft Tussle Over Coolest Map Apps

At the Where 2.0 conference in San Jose--which, like every other web-related conference these days, is jammed.  "Geospatial" content and tool companies have developed into their own micro-economy, and Where is the center of it.

The big fight, here as elsewhere, is between Google and Microsoft, over who can produce the coolest 2D and 3D global mapping platforms.  The startling news is that, in this arena, Microsoft appears to be holding its own.  Google's new "block view" feature is cool (put yourself on map, look at buildings around you, walk down street, etc.), but Microsoft's new "Virtual Earth" project is even cooler.  The latter is powered by high-res photos taken from low-flying planes, and the reported $150 million the company is spending on geospatial content is paying off (at least in the "wow" department). 

As with many of the companies here, Google Earth and "Virtual Earth" appear to be cooler than they are commercial, at least for now.  The most obvious source of revenue on the consumer side of the geospatial business would seem to be local advertising and logo/placement, but if this opportunity is producing meaningful numbers, no one is discussing them.  The CEO of Platial, for example, Di-Ann Eisnor, raved about how much money there was to be made in made in mash-ups, but offered exactly zero details.  The same went for a company that provides "soundscapes" (click on a place, listen to what it sounds like) and Garmin, which has some cool "make your own trail maps with your GPS device" technology that mountain-bikers and joggers are reportedly bananas about. Garmin's model is obvious--sell units--but the gravy train that will eventually have to support the rest of this exploding industry is still unclear.

Search Share: Google Gains, Everyone Else Loses (Again)

Bob Peck of Bear Stearns offers a detailed analysis of Comscore's domestic search share numbers for April.  Search is by far the largest category of online advertising, and number of queries is the primary revenue driver.  So query share is crucial. 

Bob's full note is available at Searchblog.  Here are the key points:

• Google's share of US queries jumped another 140 basis points to nearly 50%, up 27% year over year.  This is a continued deceleration of the y/y growth rate, but it's still impressive--especially relative to the rest of the industry.

• Yahoo lost 70 basis points to 27% and grew only 6% year over year.  Yahoo is doing better than the other major players, but this ain't saying much.  It is important to note that Panama, even if wildly successful, won't help increase query share.

• MSN dropped 60 basis points to 10%.  Given how much time, effort, and money Microsoft has invested in search over the years, this is, in a word, pathetic. (But not surprising).  Importantly, the $6 billion Microsoft is spending on aQuantive won't help this trend.

• Ask Network was flat at about 5% and Ask.com was flat at a dismal 2%.  Search is not TV, and Ask's massive advertising push has had no effect on the site's market share.  There is no reason to expect this will ever change.

 

Instant Gratification: Microsoft Buys aQuantive

Always nice to make a good call, and Jason Jones made a great one yesterday--that aQuantive would be one of the next digital advertising companies to go in the panicked land-grab of the web elephants.  Even Jason probably didn't imagine that he'd be so right so soon, but we're proud of him.

Sick of forever being outbid and then having to mumble about "expensive" amid the Google-Yahoo celebrations, Microsoft made a preemptive offer on this one.  At 2% of Microsoft's market value, the acquisition is still a tuck-in, but it's the biggest one in Microsoft's history.  aQuantive won't solve all of Microsoft's web problems, but it will solve some of them.  Most importantly, it will mean that Microsoft's web business must--at least temporarily--be taken seriously again.   

Time Warner Chief Hallucinates at Cable Show, Speaks Truth

Dick Parsons must have puffed on something stronger than a peace-pipe before taking the stage at the National Cable & Telecommunications Conference this week.  Addressing the growing tension between Big Media and Google, et al, the normally thoughtful Time Warner chief drew an analogy to one of the most famous (and gruesome) battles in the conquest of the American west.

"The Googles of the world, they are the Custer of the modern world. We are the Sioux nation,"  Reuters quotes Parsons as saying, referring to the Civil War American general George Custer who was defeated by Native Americans in a battle dubbed "Custer's Last Stand." They will lose this war if they go to war," Parsons added, "The notion that the new kids on the block have taken over is a false notion."

Um, okay, but leaving aside the outcome and horrific violence of this particular clash (if memory serves, Sioux squaws completed the massacre by collecting scalps and family jewels from Custer's still-living soldiers), who won the war?  Despite his apparent intention to express confidence in Big Media, perhaps Parsons was actually just being his usual forthright self: Time Warner, et al (the Sioux Nation), might win a battle or two, but there's no question about which side will ultimately prevail.

More from Steve Baldwin.

Yahoo! Bets on Poker

Lost in the Yahoo-Microsoft hullabaloo last week was Yahoo!'s entrance into the lucrative online poker industry.  Through Yahoo! UK & Ireland, Yahoo! becomes the first major internet company to offer real-money poker, an incredibly profitable business.

Yahoo partnered with St. Miniver Ltd., a gaming network operator from Gibraltar, to join the International Poker Network (IPN) operated by Boss Media AB, a Swedish software provider.  IPN consists of 21 different poker sites with a large presence in continental Europe.  The site is live here.

Ryan McLean from Casino City Times sums up the potential impact that Yahoo will have on the emerging online poker industry and publicly traded companies like 888 Holdings (888.L), and Party Gaming (PRTY.L) and large private competitors like Poker Stars.  Yahoo spokesperson C.J. Stanley, meanwhile, threw down the gauntlet: "The established gaming sites such as Party Gaming and 888 will be concerned and if they are not, they should be."

A quick check of the online poker traffic reporting site, PokerSiteScout, indicates that the IPN network is currently the 12th largest poker site with 1,287 cash players per day, trailing larger sites like PokerStars and PartyPoker that average 7,000-9,000 cash players per day.  Expect Yahoo! to use its strong brand and popular casual gaming business to quickly propel the IPN to the top of the rankings.

Implication of Flattening Keyword Prices

Jason Jones:  Fathom Online reports that year-over-year growth in U.S. keyword prices remains in mid-single digits.  This means that Google, Yahoo, et al, are losing a growth-driver and must grow their paid search businesses through international expansion, breadth of keyword buys, and market share gains.  The flattening of keyword prices explains both the tepid growth of all search players except Google, and the recent pick up in M&A interest in the branded-advertising business.

Where will advertisers shift their focus as ROI's begin to stabilize in the paid search business?  Probably to contextual & behavioral advertising.

          Price    q/q    y/y
1Q07    1.46    -3%   5%
4Q06    1.51    2%     6%
3Q06    1.48    17%   3%
2Q06    1.27    -9%   
1Q06    1.39    -3%   
4Q05    1.43    -1%   
3Q05    1.44 

Peter Hershberg of Reprise Media responds (Text adapted from comment below and from this Jan 2006 piece on Reprise's site): 

[FROM COMMENT]: The fact that people continue to reference Fathom's KPI is mind-blowing to me...  While it is *possible* that keyword prices are stabilizing, there's no way anyone outside of the search engines themselves know with any degree of certainty.  Along those lines, it's worth noting that in January of 2006, Fathom's KPI suggested that keyword prices for 2005 had fallen by 16%. Google's stock more than doubled over that time period...

[FROM JAN 2006]: Fathom's sample size of 500 keywords is not representative of the entire universe of advertising opportunities available on Google. There are literally millions of unique keywords being purchased in the search marketplace today. Furthermore, the KPI doesn't include either proper or brand names -- keywords that typically deliver significant volume at higher average CPC's. (In fairness to Fathom, they acknowledge this shortcoming in each of their reports. Whether or not the press picks up on it is another story...)

Second, and more importantly, Google's stock continues to rise because it's CPC's simply ARE NOT falling. And even if they were, there would be no way for Fathom, or anyone else, to know that was the case.

How can I be so sure? Because of Google's "Quality Score," a topic I've written about on several occasions in the past.

For anyone not familiar with this concept, Google defines Quality Score as "the basis for measuring the quality of your keyword and determining your minimum bid. Quality Score is determined by your keyword's clickthrough rate (CTR), relevance of your ad text, historical keyword performance, the quality of your ad's landing page, and other relevancy factors."

This essentially means that two (or more) advertisers could be required to bid completely different CPC's to occupy the same position against the same keyword. In other words, the advertiser with the "better" Quality Score might have to pay just $.10/click for the top position against the keyword "wireless accessories," while an advertiser that's been penalized for poor ad copy, a landing page that's light on content, or some other "violation" would be required to pay $.50/click for the same position.

      

Comcast: Making Sense of Yahoo, Tivo, Zimbra, and Triple Play

Jason Jones: According to ZDNet, Comcast plans to launch a new email client named SmartZone based on Zimbra's browser-based platform.  The service will target Comcast's 12 million high speed internet and digital voice service customers.  It will replace Comcast's existing email client and it is part of Comcast's broader strategy to integrate its triple play bundle.

How does this fit into the context of the Comcast-Tivo and Comcast-Yahoo deals? It is conceivable that SmartZone will be accessible from the Comcast-Tivo box in order to check email and voicemail from your TV.  One could imagine adding shows to the SmartZone calendar to be recorded at a later date or emailing clips of recorded shows directly from the set-top box.

It is interesting that even as Comcast digs in to differentiate itself from Google, Microsoft, and Yahoo, it has struck a major advertising deal with Yahoo.  Comcast.net has 15m uniques and 80m videos viewed per month.  Supposedly Yahoo will assume sales responsibility for approximately 80% Comcast.net’s ad inventory (Comcast's other web properties are not included), and Comcast’s Spotlight ad sales group will maintain sales for  the remaining 20% of the ad inventory.  It sounds like SmartZone will be a separate web property from Comcast.net, so Yahoo will not have this contract. 

In other Comcast news, this post suggests that a separate search contract could be worked out within the next month and that Google's contract with Comcast expires at the end of 2007.