Yahoo is scheduled to describe its latest turnaround strategy on Tuesday, and reportedly search is high on its priorities list. Search is the engine that drives online advertising, accounting for half of U.S. spending by most estimates, and twice as big ($15 billion) as the next category, banner ads ($7.6 billion). Big players in display ads like Yahoo and Facebook, both of which use Microsoft for core search technologies, tinker with their offerings to try to steal share from Google. So far they’ve had little success.
New CEO Marissa Mayer ran Google’s search business at one point, so she knows what works. How could Yahoo – whose Overture acquisition actually invented paid search before Google – return its search business to past glories? It could start by working on the following:
- Microsoft. Yahoo’s decision to outsource search technology to Microsoft has never really paid off. The combination has not gained share versus Google. Microsoft is still paying Yahoo a guaranteed bonus because it can’t match Google’s revenue per search figures. The contract for that bonus ends next year. Yahoo will likely renegotiate the deal. Although Microsoft has seen tiny increases in its own search share, that’s mostly been at the expense of Yahoo. But it would miss Yahoo as a distribution partner; there simply aren’t that many places where big audiences do general-purpose searching. Yahoo could threaten to switch over to Google, though that might raise antitrust concerns.
- Attribution. One reason for Yahoo to stick with Microsoft is the potential to use search to increase the value of the display ad businesses of both companies. Big agencies don’t need Yahoo to integrate their display and search campaigns, but they could use help in what the industry calls “attribution,” i.e., understanding the influence of and attributing the proper value to different ad units instead of just giving search all the credit as the “last click” before purchase. With the threat of privacy regulation looming over ad networks and third-party data collectors, the value of consumer behavioral data collected on one’s own site could increase dramatically. As portals with large audiences consuming a broad variety of content and communications, both Yahoo and Microsoft could gain some competitive advantage in attribution analysis and behavioral targeting over Google, that depends on an ad network of third-party sites.
- Social search. Regular readers know I’m pretty skeptical of the impact of social media on the kind of directed shopping search that pays Google’s bills. Still, social signals are valuable inputs into search results, and Microsoft has done a better job presenting them to users than Google has. Yahoo has minimal social data, so sticking with Microsoft – that has data sharing arrangements with Facebook and Twitter – is its best chance of tapping into social search.
Yahoo is not in a great position to go after mobile search, though neither is it particularly disadvantaged. Google has caused some Wall Street concern that lower mobile search costs-per-click could drag down its overall average. But Yahoo and Microsoft don’t have much to lose. Unfortunately, Yahoo’s Axis search-browser hybrid gives a better demo on a tablet than on a phone. While it’s an interesting example of how a search user interface doesn’t have to be blue links, it’s not likely to have any significant impact on mobile search. Phone-based search may ultimately depend on voice input, and will certainly benefit from presenting coupons and offers among results.
No, Yahoo’s best chance at search is on bigger screens. Its prowess in selling glitzy display ads to brand advertisers remain one of its remaining assets. So connecting the dots for advertisers and agencies via attribution and behavioral and social inputs is Yahoo’s most promising search strategy option.