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April 27, 2009

Do You Yahoo?

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It appears that Yahoo and Microsoft are still in the grips of a tangled tango, their long talks about a search advertising partnership remain hot and heavy. For more than a year now, the two companies have been in on-again/off-again discussions about a merger, partnership or some other strategic opportunity that would give the duo an edge against Goliath, aka Big G.

The two search platforms have historically struggled in the face of steadily shrinking market share. And in light of the current deliberations, it would seem that leadership on both sides of the table are looking for the windfalls that cooperation might garner. But rather than face the painful breakup of an all-or-nothing deal gone south, this time the couple is taking it slow with talks of partnership rather than marriage proposals.

In MarketingSherpa last week I read a primer on advertising with Yahoo! Sponsored Search. It just so happens that Yahoo’s paid search program has a number of perks compared to Google’s AdWords program — not the least of which is a higher average return! A typical comparison for a single advertiser looks something like this.

Investment in Google: 80%
Investment in Yahoo: 15%
Investment in other engines: 5%
Average conversion rate with Yahoo: 3.42%
Average conversion rate with Google: 3.39%
ROAS with Yahoo: 2.85
ROAS with Google: 1.85
Percent of Google-driven online sales: 80%
Percent of Yahoo-driven online sales: 7%

Obviously, Google has a substantial advantage of market share and overall number of eyeballs, which leads many advertisers to ignore the solid ROI that Yahoo can provide. But as Kevin Lee explained during the Advanced B2B session at SES New York this year, “If you’re not in Yahoo and Live, you’re missing a chunk of your audience.”

In the Bruce Clay offices, we see that our own clients are just as set in their ways. After talking to SEM analyst and BCI guest blogger James Kim, I learned that only 20 percent of our PPC clients are advertising in Yahoo. But as abysmal as that sounds, it’s in line with the norm.

Why, I asked James, are so many clients missing the opportunity available through Yahoo and other engines? In his opinion it comes down to two things: market share and maneuverability.

“It is too early to say what effect a partnership would have on the advertisers. I think it will really depend on its interface and data reporting for PPC accounts. This is where Yahoo and MSN are seriously lacking right now. Google has made a lot of improvements to their PPC management, while Yahoo and MSFT are still trying to catch up on the basics. Once they collaborate, if they do it right with the right management tools, they may see an increase in advertisers.”

Understandably, the day-in-day-out interaction an advertiser has with his PPC management tools can make the difference between a good day and a migraine. Google’s intuitive interface is easier to navigate and includes more robust management tools.

As for the two areas Yahoo and Microsoft have to get right before they get anywhere, the companies will gain great strides in market share if they combine forces. A partnership might also result in the power players of each team coming together to design better management tools. With both market share and management tools wrapped up, we could be witnessing the debut of the next Silicon Valley power couple. They’ve already got the silly contracted name and everything.

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One response to “Do You Yahoo?”

  1. Christopher Ross writes:

    While it doesn’t really affect me who buys (or doesn’t buy) Yahoo, my opinion for Yahoo’s sake is to simply look at Microsoft’s track record and ask how many products they’ve purchased and made better. In my memory, I can’t think of a single purchase that’s been made better by being MS.



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