Following an apparent delay in their results, conjecture about Yahoo advertising revenue appears here on the Forrester Marketing blog.  They consider whether interactive marketing is slowing or diversifying, and conclude the latter.

*Marketers have a lot of interactive options to choose from. I think perhaps the biggest realization Yahoo! came to this year is that marketers have many, many alternative places to spend their interactive dollars instead of on banner ads on portal sites. For example, marketers today can build MySpace pages, buy product placements in video games, create RSS feeds, or buy mobile search ads, to drive desired behavior among their target customers. I think Yahoo!’s ad sales slid because marketers where diversifying how they spend their budgets across online alternative.

Source: Forrester’s Marketing Blog: Interactive Marketing Spending Maturing, But Not Slowing Down

One thing I’d note is that Yahoo have a history of missed targets. 

Of greater interest is whether a systemic shift is occurring.  The quote above is telling.  Online advertising is not about banner ads.  With online tenure, comes Internet smarts, blind spots appear in pages where images are presented, and popup blockers/ ad blockers are becoming common.

Lets take a step back and consider two approaches:

1. Yahoo approach
2. Google approach

Yahoo Approach

Yahoo pull content into the Yahoo environment.  Users navigate entertainment, travel, news, groups, etc etc etc, and always within Yahoo, where ads are presented, in a fairly “in your face” way.

My view of Yahoo, is that I don’t like it, but 1/2 Bn users can’t be all wrong. 

Google approach

Google direct users to the best answer to their enquiry.  The use the “people return to places that send them away” method.  Advertising is subtly presented in the Google properties that send you away.

Of the more than 5 billion online searches Americans conducted in December 2005, 49 percent were entered on Google, according to measurement firm Nielsen/NetRatings. Google’s share of total search activity rose 6 percent from a year ago. (Yahoo 21%/ MSN 11%)

My view is that I like Google. I don’t like advertising, and theirs is subtle enough I can ignore it.  I am not alone.

analysis

My views aside, Google is the current winner in terms of searches, while Yahoo continues to maintain a significant user base.  Their models don’t lend themselves to easy comparison.  But consumer behaviour suggests Google is winning.

Search is becoming the pre-eminent way people find things:

These results from September 2005 represent a sharp increase from mid-2004. Pew Internet Project data from June 2004 show that use of search engines on a typical day has risen from 30% of the Internet population to 41%. This means that the number of those using search engines on an average day jumped from roughly 38 million in June 2004 to about 59 million in September 2005 – an increase of about 55%.

Source Marketing Today

An open question is the consumers response over time to contextual ads alongside search results.  This type of marketing supported by intelligent software, contextual marketing, has taken over from banner ads.  Its generating ad revenue and growing, but stumbles occur.

Now we have social networks evolving as a space for marketing. Another open question, is to what extent will this displace search marketing.

Finally, we have the Cluetrain endgame, where markets are conversations, and consumer advocacy, and peer recognition takes over from advertising.  The endgame is not here yet, but there are clues in watching evolution of social networks, blogs/ blog comments, help forums, and wiki’s.  The shared characteristic, is that firms are not in charge of their brand, or advertising in these environments.  Product quality and genuine reputation becomes paramount.

Relevance to Bankwatch:

As usual with internet, the journey will be rocky and surprising.  Experimentation becomes essential.