Last week Yahoo announced it had hired Scott Thompson, currently the president of eBay’s PayPal business, as its new CEO. Thompson doesn’t have any media or advertising experience, and he is still stuck with Yahoo’s dysfunctional board. But he’s got product and technology cred, which means Yahoo should be fixable.
Being a portal that combined content, communications and web navigation used to be a great business. But search and social media have steadily eroded the value of a portal as a launchpad to the web, so Yahoo needs to focus on its current identity as a premium content destination site.
With that in mind, here’s what Thompson should do to get Yahoo growing again in order to retain its position as one of the biggest players in online advertising.
- Forget about being a technology platform, a social media company or an ad network. Yahoo doesn’t have any compelling services it could deliver through APIs to an ecosystem of third-party apps. It is using Facebook effectively to promote its own content, though it could do more with Twitter. And as much as I like the potential for a premium advertising exchange to raise the value of its remnant ad inventory, Yahoo should focus on doing that through better targeting and richer ad formats and sponsorships.
- Target better. In theory Yahoo should have great marketing targeting ability based on analyzing all the information it has on its 700 million users: content interests and real-time behavior, authentic email identities, search behavior that is critical for retargeting display ads. Thompson may not be an ad guy, but he’s a data guy (he sits on the board of Splunk) and has said that data analysis will be key for Yahoo. I interpret that to mean Thompson must make Yahoo the best vehicle for targeting display advertising next to high-quality content. That means hiring big data scientists and investing in targeting and yield-management technology, and it sounds like Thompson’s on board.
- Focus on brand advertising. Yahoo could adopt AOL’s big, rich media “Devil” ad format and then leave AOL in the dust with brand advertisers by servicing them and their agencies to death. It’s already at work on advertiser relations, but it needs to accelerate the process. Yahoo should hire more-expensive ad salespeople while Yahoo U.S. head Ross Levinsohn rebuilds relationships with advertisers and agencies. It should reassign the content farm team to creating quality sponsorship advertorials. Yahoo can also do more cross-media event sponsorships like its Sundance Film Festival promotion.
- Bulk up on quality content. Lately Yahoo is less focused on selling itself than on unloading its Asian assets: There are tax advantages to trading those for other properties. Names like WebMD and The Weather Channel have come up, and they would both be great additions for Yahoo — WebMD for its task-focused ad-friendly audience and The Weather Channel for its everyday utility and cross-media opportunities. It might also want to look at youth or technology content brands that aren’t already part of bigger media companies; SB Nation is putting together an interesting network of properties.
Thompson is already working on talent retention by talking up innovation. At PayPal, 40 percent of resources reportedly went toward projects with longer-term payoffs. Thompson might have a lot of ideas about e-commerce, but he should stay away from social commerce and the crowded daily deals space unless Yahoo can better target offers aggregated from third-party deal companies.
He is probably thinking hard about mobile, too. Rather than display ads, mobile advertising will likely center on search and offers for some time. There may be some opportunities for sponsored content. Yahoo’s phone efforts should focus on content and email rather than ads. Its IntoNow product — a sort of Shazam for TV — is truly innovative, and it presents ad syncing and interactive TV content opportunities that will pay off on tablets sooner than on phones (and way sooner than via Yahoo TV Widgets). Yahoo’s other new tablet app, the Flipboard-like Livestand, seems rough around the edges but supports the kind of big, glossy magazine-style advertising that Yahoo must deliver.
Here is how partners and competitors should evaluate Yahoo in the next six to nine months:
- Big advertisers and agencies should get plenty of love from Yahoo, and they should demand proof of ad effectiveness. They should ask Yahoo to foot some of the bill for expensive media planning studies.
- Google barely participates in brand advertising and seems happy to collect ad network fees rather than own more content inventory. Eventually, Google could try to replace Microsoft as Yahoo’s search technology supplier via its better conversion rates, but it might have to do more data sharing with Yahoo.
- Facebook wants to raise the rates it charges for ads via targeted brand advertising but needs to offer better formats and sponsorships. Its role in content discovery is safe.
- AOL and MSN need to execute a strategy similar to Yahoo’s, though each is more invested in being an ad network. Any Yahoo failure with brand advertisers is an opportunity for them.