December 26, 2006

Why Yahoo’s Panama Project Is Important

Michael Arrington

37 comments »

Business week has a long article about Yahoo’s Panama project and why it may not have the positive financial impact the company is hoping for. Yahoo’s goal for Panama is to make their pay-per-click advertising program more efficient at extracting dollars from advertisers. The details aren’t important, but the basic idea is that the highest bid on a keyword doesn’t guarantee it takes the top ad spot. A combination of highest bid and highest click through rate determines where ads are placed. That change should bump up the average cost-per-click, and have a positive effect on Yahoo’s revenue.

The article doesn’t mention Microsoft’s Adcenter product, which is a full generation beyond both Panama and Google’s existing product because it factors in demographic information about the person viewing the advertisement. While Microsoft hasn’t ramped up on advertisers yet, it’s clear that this is a three way race. An example of how much Microsoft means business is the fact that they probably bought their way into handling ads for Facebook. Without a revenue guarantee, Facebook would have gone with Google or Yahoo.

Frankly I don’t know who’s going to win the contextual advertising war over the long run. The important thing is that Yahoo has finally weaponed up, and the war is starting in earnest. Google has long hidden its revenue share details with partners, although the rumors suggest that they keep 50%ish of the gross revenue. This is way too much, and in a properly competitive market that percentage will tend towards zero as Google, Yahoo and Microsoft all compete for the same page views. Profit will need to be generated based on new product features and efficiency gains, which is the way it should be. Of course, they’ll always own their own internal page views as well, and it will be an important factor. To get the participation of the big advertisers there needs to be enough inventory to make it worth their attention. And without a robust network of advertisers the auction prices won’t go high enough. Still, all three of these companies have massive internal page views to lure these big advertisers.

So while I don’t know how much of a difference Panama will make to Yahoo’s bottom line next year, I know that the fact that they are catching up to Google is good for all of us.

Sphere It

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TanNg

December 26th, 2006 at 2:31 am

I hate Snap. It’s very annoying, could you please turn it off on your site?
sivasankaran

December 26th, 2006 at 2:44 am

Q & A With Jerry Yang

Three years ago, Jerry Yang realised a dream, creating an Internet-based online guide called Yahoo! One year later he co-founded Yahoo! Inc. The rest, as they say, is history. Yahoo has become one of the largest online navigational guide sites in the world, and has gone line. on to become involved in numerous subsidiary ventures, ranging from guide sites to a print publication. Yang is a native of Taiwan. He goes by the title of Chief Yahoo.

Yang is almost always somewhere else these days, according to Yahoo’s public relations manager, Jennifer Hwang, “I don’t even know exactly where he is right now. He might be loafing about in the park” she said, “You better check there” Sure enough I see him playing ball. We sit and I ask him several questions

Q. How often do you travel in a year?

A. As often as my heart desires. Usually 2-3 trips per month.

Q. How do you deal with jet lag?

A. I stay really, really tired — that way I can sleep whenever, wherever. This way I avoid having to work (laughs).

Q. Do you have a favoured plane or seat?

A. The newer 777 or airbuses. I don’t care which part of the plane so much, but I always like to sit on the aisle.

Q. What places do you visit most often?

A. New York, Tokyo, L.A., Seattle.

Q. In these places, how do you get from the airport to your hotel?

A. In Tokyo: the Tsukiji Taxi.

Q. What’s your favourite hotel?

A. I’m very picky. It must pamper me with all the comforts of life just like Silicon Valley does. It has to have a fax and second phone line. It must have multi cuisine restaurants, a gymnasium, a swimming pool where I can safely masturbate. I am a Taiwanese. We have filthy habits. (laughs)

Q. What’s your favourite restaurant?

A. I prefer one that offers me a filling meal so that I can be lazy. I like to try local dives, noodle shops — the kinds of places

Q. If you have an afternoon free, where do you go?

A. What are you talking about? My afternoons are always free. I am the big chief. Usually I sit on a rocking chair like an old man and nap for a couple of hours while my company is doing fuck knows what (laughs). In the evening I sit in a cafe next to a park and read the paper. Please do not ask me what I do in the morning.

Q. What’s your single favourite place or thing in your most frequented cities?

A. Spring Beds. In Tokyo: the Tsukiji fish market for sushi. In New York: the taxi drivers. In L.A.: the freeway signs.

Q. What sort of a person are you?
A. I am a stupid man. That is the reason I became a billionaire before the age of thirty. I do not want to worry about supporting myself and standing on my feet. I like to get things for free. I am a big time freeloader. I am naïve enough to think that if I start my own company and sit then I can make millions. I want to get results and do the best for myself without working.

That is why I went to Silicon valley. I wanted easy money, fast cars, cool babes (laughs). If I want something I deserve it. There any fool can start an internet company sit with it in a lazy manner and make millions. It is a place where who you are and how hard you work is irrelevant to success. Look at Jeff Bezos. The guy is a perpetual drunk. Yet he formed Amazon and he is worth several billions. Look at Ramesh Mathur. He is an Indian of all things. He is an IIT dropout. He did not even have the brains to complete a formal education. Even he started his own internet company Junglee.com sat with it for three years like a mother sits with her child (laughs) and sold to Amazon for a couple of hundred million dollars.

Q. Have you made any memorable cultural or business faux pas?

A. When I go to Japan I make sure that people bow low and kiss the ground I walk on. I am a self made billionaire and I think no end of myself.

Q. Do you have any cultural or business secrets you could pass along?

A. Well for one you must always look for the soft option in life. That is why I went to Silicon Valley. It is softer than a marshmallow. It is the perfect excuse to be lazy. If you want to make millions you must come to Silicon Valley start your own internet company even if you do not know much about it. You just have to take it easy and go with the flow so to speak. Laugh at your problems and remember that Silicon Valley is an escapist way to live. So your problems are not rooted in reality. Look at me. I knew fuckall when I started Yahoo.

I am a simpleton from Taiwan. I know nothing nada. That is what is so great about America. Even if a person knows nothing and is not stupid he can still make something of himself. When my buddy William formed Microsoft he did not know the difference between B and C. Why did he drop out of Harvard? Because he did not have the intelligence to complete its three year course. It could be four years I am not sure. Just shows how gullible customers can be (laughs). It helps a ton when you learn people’s names and don’t butcher them when trying to pronounce them. (Unfortunately, I haven’t mastered this. This is important so that you can order them around.)

Q. How do you cope with loneliness on the road to your hotel?

A. I tell people who I am. They cannot believe how such a mild mannered simpleton has come such a long way. In New York: the taxi drivers groan and grumble about their dead end lives. I pity the poor bastards (laughs). They work ten twelve hour days. For what? I on the other hand sit on the rocking chair, do nothing and admire my billions.

Q. What travel sign makes you short tempered?

A. Any sign that has the word work on it (laughs).

Q. Do you have any essential packing tips?

A. Always pack for one more day than you expect. You might like the place so much you might want to stay and enjoy it some more. Though I must say that in Silicon Valley I get all the enjoyment a man could possibly desire.

Q. Any future plans?

A. I might take a permanent vacation like Aerosmith. Hell I do not need to do that. I have been on vacation ever since I came to Silicon Valley four years ago. (Laughs)
S.Z.

December 26th, 2006 at 2:55 am

As a small publisher, if I could earn more from Yahoo or MSN, why should I use Google then? No matter who will win contextual advertising war for those search engines, I’m sure advertisers and publishers will be happy.

Tech Tutorials: http://www.hotcoding.com
Tyler

December 26th, 2006 at 3:24 am

I just find it so cool that Microsoft adCenter is offering $200 free advertising. http://www.startadcenter.com/200unoffdm/
Charnchon

December 26th, 2006 at 3:52 am

placing the ad based on bid amount and number of clicks? does not sound like a good idea.
Tim

December 26th, 2006 at 3:54 am

It’s interesting to see if free alternatives make a dent in the market.

One example is http://www.adgridwork.com/ I tried using them for a kitchenware company, but there just aren’t enough other related businesses using the service yet to make the ads related.

One question is will contextual advertising become less effective as web users “wise up” to ads that look like content?

http://bla.st/advertising/
Tim

December 26th, 2006 at 4:18 am

“A combination of highest bid and highest click through rate determines where ads are placed.”

Surely this makes it more attractive to game with click fraud? At least a combination means so those that game the system have probably paid money too, which they could lose.
Anita

December 26th, 2006 at 6:18 am

Tim - I don’t see how this would create more click fraud. Are you suggesting that advertisers would start clicking their own ads to get them higher in the list? If anything, it should decrease fraud from publishers (e.g. bloggers, SEO scammers, etc.) because the highest PPC ad may no longer be the 1st one listed.
brad

December 26th, 2006 at 6:42 am

I have used google, yahoo (old) and yahoo (new), and MSN. I must say that MSN is so far behind it is not even funny. Over this past holiday (xmas) some of my retail client’s ads went missing for hours at a time - with MSN unable to figure out why.
Richard Bowles

December 26th, 2006 at 6:48 am

- I agree the more players on the field the better. Theoritically it means that more players touch the ball.

-Mid comment rant - Is this TechCrunch, and Mr. Arrington’s blog or sivasankaran ’s blog

- Ok back to the economics - if you make it more vaulable then it already is to be #1 of course; it will be more coveted. When you ad that the #1 spot is the one with the most click thrus and also highest paying; it will let the consumers have more insight to your system then you think -

- Think of this -

Now people game the word ‘for example’ mesotho…. (the cancer) it gets about $28 a click…. when this new system implements and people find out that other words are ranking hire (therefore they are getting more click thru and have a higher click thru rate) you just gave some people (bad people) information they didn’t have… this is no good -

I suggest - you work on better way to control the current model; not try to re-invent the wheel… Having the best Anti-click Fraud team will win as many advertisers as - having some fake innovation if not more

-Rbowles
Beatbox

December 26th, 2006 at 6:58 am

Brad -

Your client’s ads were probably not showing up all the time because of the new budgeting feature. There’s a good chance that you wouldn’t see the ad because it wouldn’t show up for every search depending on the number of clicks that day.
Mitch Wander

December 26th, 2006 at 6:58 am

Although Amazon.com has not had much success with running a search engine, I think they could end up being a significant player with ads for search. I’m not sure that Google vs. Yahoo is the only or final battle in this space.

Amazon.com is gaining expertise in contextual ads through their Omakase program for Amazon.com Associates. Their emerging friends, Listmania, badges, plogs, and other community features can be duct taped together to duplicate social bookmarking (and could probably be applied to search and bookmarking in ways comparable to del.icio.us or even Google Co-op). They’ve successfully used tags for a while now - and have Google beat, for now, in their practical uses of tags.

On top of this, Amazon.com has relationships with hundreds of potential advertisers through Amazon.com Marketplace.

(I’m not an Amazon stockholder or employee. Just watching how this shakes out in my roles as an online marketer and blogger.)

This will be interesting as Amazon launches and integrates new features.

Mitch
MistOne

December 26th, 2006 at 9:52 am

Y’s Panama is also important because it forces google to innovate again, their virtual monopoly on search and search ads needs to be challenged.

Personally, I feel that the model is getting a bit stale and seems great for them, but really lacking in lead generation value for the small advertisers that make up the majority of the users.

No doubt a good tool for advertisers to get in front of customers, search is still very important, but as a business owner, I want paying customers, not click throughs.

Online Advertising and Search Marketing, as it stands still seems to be at 1.0, so new players, technologies, and innovation are needed to keep it moving.

I could care less who leads the way to 2.0, just that it happens and the value is realized by big and small players alike.
tarunchandel

December 26th, 2006 at 10:22 am

Hi

I would like you guys to keep the snap on as it’s very useful tool. I am also using it on my blog and I like it. I just wrote as the first comment was against it.
Beatbox

December 26th, 2006 at 10:27 am

I think the snap tool sucks. Thumbs down here.
Fashion Industry Ceo

December 26th, 2006 at 11:32 am

I think google is still going to be the number one contender!!!!!
Zack Kupperman

December 26th, 2006 at 12:21 pm

Google rocks.
Rick Toastiswarm

December 26th, 2006 at 12:25 pm

The only thing Panamas has are small nible Portuguese lads.
Daniel

December 26th, 2006 at 12:27 pm

I don’t get it. What took Y! so damn long?

A technology project that makes your search better (showing more relevant ads to searchers) and makes far more money, and is conceptually simple. CPC*CTR as a profit-maximizing formula isn’t exactly rocket science. So I’m stumped, and wondering how long it will take them to catch up to Google’s next move.
Tso Dun

December 26th, 2006 at 12:27 pm

Tibet is situated between the two ancient civilizations of China and India, but the tangled mountain ranges the Tibetan Plateau and the towering Himalayas serve to distance it from both. The Tibetan language is a member of the Tibeto-Burman branch of the Sino-Tibetan language family. Tibetan history is characterized by a special dedication to the Buddhist religion, both in the eyes of its own people as well as for the Mongol and Manchu peoples. Tibet is nicknamed “the roof of the world” or “the land of snows”.
Alexander S

December 26th, 2006 at 12:35 pm

Did anyone read the article and then take a look at the mentioned competitors? I surfed over to TACODA (Where the people are®) but the site wouldn’t display.
Check the screenshot: http://paintedover.com/uploads.....iftfox.png
There is a “View HTML” link in the top left corner but clicking that only displayed a purple rectangle in the center of the page and a client login link. http://paintedover.com/uploads.....ftfox2.png

How are these guys supposed to eat Yahoo’s lunch? I think that Business Week is either failing to vet their sources properly or deliberately misconstruing the actual competitive landscape.
=ml=

December 26th, 2006 at 3:13 pm

If you don’t like it, disable snap yourself:

http://www.snap.com/about/spa_.....able_spa=1
Steve M.

December 26th, 2006 at 3:21 pm

. . . and yet . . . the 8 major problems with paid search remain . . .

As long as advertisers are stuck (even if they don’t yet realize–yet–that they are) with trying to reach indirectly–and problematically (ie click fraud)–people by merely bidding on the words we all enter into little search boxes instead of (permissively) on our actual traits and characteristics (keytraits), PPC will never reach the lofty level it could . . .
Trick

December 26th, 2006 at 3:58 pm

LookSmart has a great AdCenter that actually launched well before MSN’s.
Adrian Keys

December 26th, 2006 at 7:12 pm

“Your client’s ads were probably not showing up all the time because of the new budgeting feature. There’s a good chance that you wouldn’t see the ad because it wouldn’t show up for every search depending on the number of clicks that day.” - BeatBox

Your explanation is fine but the problem is apparently MSN themselves did not know what was happening…………
Dan

December 26th, 2006 at 7:23 pm

People already make a lot from Adsense but if Yahoo can help them make even more they’ll switch.
Shokal

December 27th, 2006 at 1:31 am

Great news for all publishers out there. no more reliance on AdSense solely plus bigger portion of the revenue to the publisher means higher revenue for publishers therefore better publishers sites therefore better internet. Celebration!
Pramit Singh

December 27th, 2006 at 3:26 am

I wrote about te importance of Panama for Yahoo in the first week of December. Readers can check out MediaVidea Blog. Here is the link:
http://mediavidea.blogspot.com.....-with.html

.
Shannon Clark

December 27th, 2006 at 6:07 pm

I think there are a few subtle things to look at that this post just skims.

1. It is not at all clear to me that the percentage will EVER go to “near zero” even in a highly competitive market - publisher’s and other media content have long paid their sales people 20% (or more) of the ad revenue they bring in - and in general I suspect that few content providers will not gladly trade 20 (or event 30-40%) of sales in exchange for not having to have a dedicated sales force (provided of course that the net revenues meet expectations and needs). 50% perhaps is too high - but it would be instructive to look at it in both percentage and absolute terms (I’d guess that the vast majority of websites hosting googe adsense ads generate less than $10,000/yr in ad revenues - very likely vastly less than that.

2. It is also worth looking at how much online advertising is dominated by “large” advertisers who are buying in essence “run of the network” type ads (i.e. for whom all that “internal” traffic might matter) compared with how many advertisers are specifically using online ads to reach a very narrow and specific niche - in a highly targeted manner, where the net after the costs of clicks generates profits.

As I see it while all three of the ad competitors (as well as smaller networks) are going after “large” advertisers (Ebay, godaddy, major Madison Ave. brands etc) they also have, at least in the case of Google and likely in the case of Overture/Yahoo, a vast network of small advertisers. Who are mostly self-service and who buy ads in small increments, but whose ads are mostly highly targeted and relevant - the types of ads that more so than a generaic link to Ebay, are links that save time while searching or enhance the value of a given website to the visitors. I know that many many times the links on the right in a given Google search have been more useful and immediately relevant for the action I am seeking to take than many of the organic search results (most common when I have been searching for specific items I wish to purchase).

I think that it would be very instructive (if hard to get firm figures) to analyze what percentage of each of the major ad networks online’s ads come from this “long tail” of advertisers and what percentage comes from the “Big” advertisers (perhaps filtered via relationships with advertising firms/media placement firms/white hat search engine optimization firms). I know I’ve read of Google expanding its high end sales force and opening up an office in NYC for ad sales among other activities - so clearly they are major enough to warrant employee time.

[full disclosure, I’m in the midst of launching my own small web company and we’re going to be evaluating the best option(s) for online advertising networks to work with to embed ads into our mostly mobile applications. We’re also going to be soon in a position to advertise ourselves, likely taking each of the networks up on their free advertising offers - and then continuing with the networks that offer us a net return on investment - i.e. minimal click fraud and highly targeted, relevant placements that visitors who convert to ongoing users]

Shannon
David Mackey

December 29th, 2006 at 6:21 pm

I am just using Google Adsense right now, but after I review the ToS of each service, I might start dividing up the ads on my page - one Google, one Yahoo, one Microsoft and seeing how they do.
RB

January 16th, 2007 at 10:13 pm

Some posts here wondering why Yahoo has taken so long to catch. As a former Yahoo employee, I can safely say that Y! is very bureaucratic these days despite all the smart people who work there. As a result, it takes eons to make decisions. The Panama project is something like 2 years behind schedule.
grant

January 19th, 2007 at 11:54 pm

Wire’s current issue sheds light on why Panama project takes so long, to our outsiders.
Silam

February 7th, 2007 at 5:20 pm

I don’t see any change except that they will rip people off more than they used to. Their prices will rise and they will keep screwing the advertisers.

I want to see these people out of business and I want to see the competition coming and smack them in the face.