Yahoo Inc is set to introduce on Monday a long-delayed upgrade to its Web search advertising system, setting the stage for a face off with Web search leader Google Inc later this year.
The diversified Internet media company is looking to encourage both new and existing corporate advertisers to start working with its rebuilt search marketing system in preparation for full introduction during the third quarter of 2006.
The highly anticipated redesign is the first big overhaul of the search advertising system since GoTo.com pioneered paid search advertising eight years ago. Yahoo paid $1.6 billion to buy the successor to GoTo, called Overture Systems, in 2003.
"Understanding how ads actually work together is what we are introducing with the new system," said Steve Mitgang, Yahoo's senior vice president of advertising. "The current core platform for YSM (Yahoo Search Marketing) has run its course."
The system is a software-based marketing console to help corporate advertisers and advertising agency buyers understand how to target relevant advertising to Web users based on the keyword search terms consumers use to find information on Web sites.
Advertisers can instantly calculate the cost of acquiring new customers using Yahoo's data and analytic system. Buyers can also test for the most effective ads and make rapid changes.
But the highly competitive online ad market is not standing still. Ad agencies and sophisticated buyers hungry for customers say they are agnostic over which system they use.
Ad systems from Google and Yahoo, along with lesser players Microsoft Corp, MIVA Inc and LookSmart Ltd all give advertisers the ability to run ads triggered when Web site users search for popular keywords on a site.
"With this release, Yahoo catches up to Google from a technology standpoint," said Paul Kelley, 27, an ad buying specialist with Carat Fusion agency in San Francisco.
"It's something the industry has been waiting on a long time."
Samir Patel, 28, the founder and CEO of SearchForce, a paid search marketing consultant, said Yahoo's software fixes basic usability problems that have given Google big advantages in the market in recent years. This may lure more small businesses to become active paid-search advertisers with Yahoo, he said.
The Yahoo ad system also offers geographical targeting based on databases of geographical terms it acquired when it bought London-based WhereonEarth last year. Thus Yahoo can infer when Web searchers mean Soho, London or Soho, New York.
Eventually, the system will also allow advertisers to buy ads across Yahoo, Google, Microsoft and other systems, allowing for comprehensive budgeting, something Google already offers.
Mitgang said the system will be rolled out in phases in order to lessen disruption to Yahoo's base of hundreds of thousands of customers, who need time to optimise the system to maximise the number of customers their ads may attract.
The first phase, which begins on Monday, is to deliver the core upgraded data and analytics platform. The second phase begins in the third quarter, when the full marketing campaign application becomes available to advertisers.
Google, which jump-started growth in the pay-per-click search ad market, has seen its market share continue to surge thanks to continued innovation and international growth.
Google has been growing its search business at 80 percent, while Yahoo is growing at half that rate, at around 36 percent, when counting both online display advertising such as banner ads along with search advertising.
By revamping its system, Yahoo is seeking to ensure it can move more quickly to compete in emerging areas of the online advertising market, such as the integration of text and graphical ads and click-to-call Web phone customer services.
Future versions will give advertisers the ability to more precisely target Web advertisements based on demographic factors or online behaviour, Mitgang said.
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