With New Deal, Yahoo Sends A Message About Its Search Tech

With it’s renegotiated Bing deal, Yahoo regains control over a substantial amount of ad inventory, and gives its own ad tech a chance to shine.

Each Bing/Yahoo Deal is a Statement About Yahoo’s Capabilities Versus Bing

The original Bing/Yahoo search deal took Yahoo out of the search technology race. They kept a search engine on their sites, but results came from Bing. They also adopted Bing’s ad inventory. The deal turned Yahoo from a player in search into a distribution channel for Bing.

At the time, I think the deal was a necessary admission by Yahoo that it had fallen behind in search. Yahoo had built its business around portals and directories, and realized too late that search circumvented the need for either of those things. With the deal, Yahoo made the decision to look at it’s search results as an asset to monetize like it’s homepages, rather than as a technology with a lot of untapped potential.

In contrast, Bing was willing and able to invest in search technology. They were not that strong, but the strategic focus was there. Unfortunately, 5 years later, Bing ads are still not as engaging (and probably not as lucrative) as Google ads. Though Bing has successfully grown it’s search share.

The new deal is an admission that the Bing/Yahoo combo has not been as potent (for Yahoo) as expected. And that Yahoo might be able to build better ads itself. While Yahoo has made money with Bing, they’ve not been able to capitalize on Bing technology the way they expected. With the new deal, Yahoo gains the ability to try new ad partners or it’s own ad technology on desktop results. We might also expect to see more Yahoo ad units in mobile — though they’ve always had that option and chose not to use it.

With search becoming more fractured by mobile, and the growth of local results, its a good time for Yahoo to re-examine its arrangement with Bing. At the same time, Yahoo under Melissa Mayer is looking to invest ad technology products like the Gemini.

The new Bing/Yahoo deal is a strange marriage, where 2 competitors are sharing real-estate. As Yahoo invests in building it’s own ad business, advertisers should expect new offerings from Yahoo but also from Bing who will need to make sure they’re ads remain worth Yahoo distributing. Hypothetically, Yahoo could build up it’s ad inventory and unit quality to the point that Bing becomes a deadweight. This wouldn’t happen overnight, but if Yahoo can show a better ROI on it’s own ad inventory and increase sales through its network, then the relationship with Bing becomes less important.

What’s Coming for Advertisers

For advertisers, the two main issues are going to be management and quality.

You’ll now have another platform to learn, optimize and support. Gemini is primarily positioned for mobile and native ads, but will likely be extended to better serve desktop ads in the future. You’ll have to decide if it’s worth it to work through the Yahoo system, or continue to buy ads through Bing.

Regarding quality, we have to wait and see what Yahoo comes out with. Being the owner of some of the top destinations on the web gives Yahoo a lot of knowledge about user experience, interests and intent. They also still have a deep bench of engineers. If they can parlay their knowledge into more engaging ad units, then Yahoo might become a very useful partner, especially for targeted ad buys.

The publisher network is probably Yahoo’s weakest link, but that can be built-up via partnerships or incentives (better revenue per ad). Yahoo can also drive more impressions by continuing to build new content that draws people to it’s properties. The new season of Community and the SNL archive deal are the perfect examples of this.

How Much Does This Matter?

Small, self-service paid search advertisers should stick with BingAds for the time being. There is no compelling reason to grab a Gemini account unless you see native posts becoming part of your ad strategy.

Larger search advertisers will need to sit down with their reps and figure out if anything needs to happen now. But agencies and buyers should start talking with Yahoo about new opportunities on desktop.

What About Organic Search

Surprisingly, nothing is changing when it comes to organic search. Bing will still power results for Yahoo. They only caveat I can think of is that you may start seeing more ads powered by Yahoo, and that could lead to changes in click-through rates on organic vs paid results.

Some things to note about this deal:

  • Yahoo will still use Bing for organic search
  • Yahoo will be able to serve 49% of desktop ads from a non-Bing source.
  • Yahoo’s Gemini ad platform will become another system that paid search users need to understand.
  • Yahoo will no longer handle Bing ad sales for larger buyers
  • Bing ads will still show up on Yahoo, but you will have the option of buying some ads from Yahoo directly.
  • Great article — Can you say strange things have been happening every since the new CEO — Good and bad.

    • cboulanger

      I somehow missed this comment a while back, but this post and your question are extremely relevant right now. I not sure if the fault lies with Mayer, the composition of Yahoo, or the board but Yahoo has been unable to turn itself around. My read on it is that it needed drastic changes in emphasis — less focus on short-term ad revenue increases and more on developing new products. Years of stagnation left Yahoo with a lot of pieces (email, portals, Flickr, etc) that were not best in class. To catchup, Yahoo needs to identify 2-3 key areas and focus on innovating there. I don’t know enough about the companies pipeline, but they need to either find new markets or sell themselves off.

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