Quickly: According to the most recent comScore data, what's the second-most-visited Website in the US behind Google? No, it's not Facebook. It's Yahoo! But Yahoo has not translated such huge popularity into huge revenues!
The question is: Why not?
Conventional wisdom says if you build a Website and they come, you can parlay those eyeballs into advertising riches. Yet Yahoo, by all measures, is not doing all that well, pulling down around $4.5 billion in 2010, according to PaidContent. This is in stark contrast to Google, which earned almost $30 billion last year, much of it from advertising.
First of all, let's look at why Yahoo seems to be able to attract huge numbers of visitors. According to an article on Fast Company, it's because of a unique combination of algorithmic magic combined with human editorial input on its Homepage Today module, which provides a snapshot of the day's news and gossip.
According to Fast Company, Yahoo generates "45,000 totally unique versions of the Today module every five minutes" [emphasis in original]. It's impressive and it works, enabling Yahoo to attract 35 million unique visitors every single day to its homepage.
So far, so good. Yahoo clearly has the smarts to generate content people want to see; but there is a disconnect when it comes to generating revenues from those millions of visitors.
As The New York Times reported last week, Yahoo market capitalization has remained stagnant since 2003. This in spite of the fact, NYT reports, that "The company holds the No. 1 spots in news, sports, finance, entertainment news, real estate and comparison shopping sites, according to data collected in June by comScore."
Yahoo seems to be in an enviable position here. And yet, while it has tons of visitors, it makes a mere fraction of the money Google is making on ads. The NYT article explains this is because Yahoo continues to sell ads in the same way they were sold in the pre-digital age -- with ad sales people selling ads at a premium cost. If those ads don't sell -- and they haven't sold very much -- they go to an ad exchange where they are dumped at a much lower rate.
Now it seems to me if you have a business model that fails to take advantage of your unique market position, you might take steps to change, but Yahoo stubbornly adheres to this model in spite of its obvious shortcomings.
Does this sound familiar? It should, because it sounds to me like the print newspaper business, which for years was able to make money hand-over-fist when it controlled the ad market. As advertising shifted to TV, then online, newspapers were no longer able to generate the same revenues they could when they controlled the market.
It's simple economics, and the market can be a brutal place, but Yahoo is not a print property and never has been. Why would it behave like one and continue to do so in the face of abject failure?
It's probably a question only CEO Carol Bartz can answer, but you would think, given its ability to attract visitors, that Yahoo might start experimenting with different advertising models in an effort to boost its stagnant revenue picture.
That it remains fixed in place doesn't exactly bode well for the company. If you can generate that kind of audience, it's baffling you can't generate the corresponding revenue. Unless Yahoo takes steps to fix that, it will continue to struggle.
— Ron Miller is a freelance technology journalist, blogger, FierceContentManagement editor, and contributing editor at EContent magazine.
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