John Keck is a Yahoo convert.
A year and a half ago he was one of many interactive-media directors who loathed working with Yahoo to buy and place ads. But a month ago he gave a speech called "From hate to love" at a Yahoo-sponsored summit for interactive advertising agencies. In the speech, he described a sponsorship deal he helped broker between Compaq Computer and Yahoo--one that might have been impossible a year ago.
"I used to be outspokenly negative about Yahoo," said Keck, who works for advertising agency Foote Cone & Belding. "They had incredible arrogance...They hired a bunch of kids who took orders and made lots of money.
"But our relationship with them has completely changed--they've let us in the door. They're now focused on what's going to make Compaq happy with Yahoo and what's going to make (our agency) happy with Yahoo."
Once secretly reviled by many traditional advertisers and agencies for arrogance and inflexibility, the kinder, gentler Yahoo has been noticed in the industry. Whether the effort shows up in the bottom line may be revealed Wednesday, when the Internet bellwether reports second-quarter earnings.
While Yahoo tries new tricks to land advertisers, competing Web sites also are pulling out the stops--sparking something of an arms race among Net content companies.
The most obvious examples are larger ad formats on mainstream sites such as Ask Jeeves, CBS MarketWatch, Excite.com and The New York Times' Web site, which typically have kept a tighter rein on the aesthetics of their sites in fear of scaring visitors away. NYTimes.com went so far recently as allowing Oracle to place ads that sent a military aircraft buzzing across the news stories on the site.
Behind the scenes, ad salespeople are also becoming more accommodating, media buyers say. Perhaps nowhere is that more evident than at Yahoo, still the most trafficked site on the Web despite revenue troubles and management changes.
Among the changes, Yahoo is working closely with agencies rather than avoiding them. It also is developing longer-term relationships with clients rather than pitting one against another to jack up rates.
Overall, Yahoo representatives are approaching deals with a sense of humility and collaboration, rather than the cockiness and patronisation that earned it the reputation of a Web bully.
"In the past they would come to us very arrogant and demand things; now it's a tail-between-the-legs approach," said one media buyer who requested anonymity. "Now they're trying to be more of a partner for us. They seem to be more flexible...and trying different ad models and different approaches."
A vicious cycle
Playing nice to agencies and advertisers is crucial for Yahoo. During the past year, the company has fallen from being a Wall Street darling and poster child for the Internet boom to a battered and bruised casualty of the dot-com implosion. Many advertisers have been washed out by the stock market collapse, while the survivors have drastically cut their spending.
In its first quarter, Yahoo reported pro forma net income of US$7.6 million, or 1 cent a share, on sales of $180.2 million. The number was substantially down from the same period last year, when Yahoo reported net income of 10 cents a share on sales of $230 million. In addition, Yahoo's total number of advertisers in the first three months of the year fell to 3,185 from about 3,700 in the previous quarter.
Yahoo's shares have tumbled 87 percent from a 52-week high of $142.68 to about $18.
The company is scheduled to report second-quarter earnings Wednesday, providing some insight into whether the softer side of Yahoo is beginning to pay dividends. Analysts expect the company to break even in the second quarter, according to earnings tracking company First Call.
To reverse its slide, the company hired former Warner Bros. Co-Chairman Terry Semel in April as its new chief executive and former Reader's Digest executive Gregory Coleman as its head of North American operations.
Much of Yahoo's earlier success, and later collapse, was through its ability to ink multimillion-dollar deals for advertising and sponsorship placement throughout its site, the company admits. Once the immediate dollars were taken away with the stock bust, it became harder to convince traditional advertisers to fill the void. Traditional advertisers typically take longer to court and require more care and attention than online companies.
"There has been a very aggressive reaching out to traditional advertisers to get them involved in the Internet," said Murray Gaylord, Yahoo's vice president of brand marketing. "The agencies today are also much more receptive to the whole proposition. They're wanting to get involved."
The agencies are especially important to Yahoo's future because they often hold the key to valuable relationships with traditional brands, which the company hopes 70 percent to 80 percent of its total ad revenue will come from by the end of 2001. Yahoo has seen that it needs to create long-term relationships with these companies not only to sell advertising but also to sell access to valuable research and data it holds on customers.
