Yahoo’s banner ads and ‘old world view’ harm its stock price

A look at why Yahoo’s stock price doesn’t reflect the site’s popularity.

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Yahoo is an extremely popular website, yet its stock has performed badly. Why? Because it sells stuff (banner ads) people don’t want to buy.

Carol Bartz, Yahoo CEO, said in 2009 that “My fortunes are tied to my pages.” Yahoo has a lot of pages and page views. It lives in a pre-Web world of pages, pages, pages. It is the ultimate Cult of Volume website.

In 2010, TechCrunch asked Bartz: “What is Yahoo?” Her reply was, “Yahoo is a company that is very strong in content. It’s moving towards the Web of one. We have 32,000 variations on our front page module. We serve a million of those a day. It’s all customized.”

It’s very hard to make money directly out of content on the Web. Content is an enabler, a facilitator. You can find ways to make money from other people’s content, but creating your own content and trying to make money directly from it, that’s not easy.

Bartz claims that Yahoo is customized, that it’s moving towards the “Web of one.” When I went to Yahoo recently I saw a big banner ad for a mobile phone plan that I definitely don’t want. This plan in no way meets my needs. Is that customization?

Yahoo has an awful lot of good things going for it, but its business model and philosophy are very much pre-Web. It’s concerned with using visual advertising to sell people things they don’t want. This traditional advertising approach thinks that the ultimate achievement is to be so clever, unusual, funny or just downright weird that it will grab your attention and headlock you into buying stuff you had no intention of buying.

A great many people avoid display banner ads like the plague. To counter this, the ads are designed in increasingly deceptive ways, with all sorts of tricks to gains clicks. But customers are becoming better and better at simply ignoring these irritants.

These traditional brochure-ware banner ads used to sell at a premium. But Yahoo is finding it more and more difficult to get a good price for them.

“When Yahoo does not manage to sell the available space on its premium pages at a guaranteed high price, it channels the space as Class 2 display into the ad exchanges, where it is sold at much lower rates,” Randall Stross wrote in The New York Times this month. “In the second quarter, a significant portion of its Class 1 display space in the United States market failed to sell.”

The result? Yahoo’s stock has basically been in the doldrums since 2003. It’s recently had a tough time, dropping 20 percent since July 19. Yahoo has an old world view of the customer. It buys into the belief that the customer is there to be marketed at and advertised to. Sure, that model still has some value. If you flood a page with banner ads you’re bound to get some clicks.

Focusing on pages and content is tactical. Focusing on what people want to do on pages is strategic. Traditional marketing is about getting attention. But Web marketing is about paying attention.

Gerry McGovern is the founder and CEO of Customer Carewords and New Thinking e-mail newsletter. Contact Gerry at

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