No Yahoo (YHOO) bashing today

By: ispeculatornew
Date posted: 05.14.2010 (3:27 am) | Write a Comment  (0 Comments)

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It made the news this week. Yahoo is no longer the king…. King of what you might ask? As most of you know, I’m not the biggest fan of Yahoo so just the fact that they were king of anything at all is a surprise by itself, right? Actually, up until a few days ago, Yahoo was the internet company that had served the most “display ads” on the internet. Display ads are the ads that you would see on my content web pages, generally used for branding. They are almost exactly the same thing as ads you would see in a newspaper or a magazine. They contrast with search ads that Google (mostly) displays in that they are not text based, but rather images but also because they do not appear on search pages.

So anyway, news is out this week that Yahoo is no longer serving the largest number of display ads to US customers, as it was outranked by Facebook. In the first quarter of 2010, Facebook served 176.3 billion ads with Yahoo coming a distant 2nd at 131.6 billion. After discussing how Facebook now had passed Google in terms of unique users (although that is debatable depending on how the math is done), is Facebook now the undisputed king of the web? Looking at the below chart, you could certainly think so.

Chart is from Sillicon Valley Insider

It’s not all

However, as in everything, impressions are not created equal. While I love Facebook’s business model, and am not a fan of Yahoo’s, I consider impressions on Yahoo to be much more valuable than Facebook’s. It’s quite simple really. When they are on a Yahoo page, users are generally looking for information and have an “open mind”, they tend to notice more what’s displayed on the rest of the page, the sidebars, etc. Compare that to a Facebook user. They tend to zero in on what they are looking for. Watching photos from a friend’s wedding? Chances are that users would not even notice whatever is next to those photos. It’s really simple but it makes a huge difference in how attractive those ad spots are for advertisers. I would bet that Facebook advertising rates are among the lowest on the internet for display ads because users probably do not pay much attention to them. Again, I’m a fan of Facebook’s model, but we do need to look at more than the number of impressions. Is Facebook now the website with most display ads being served? Absolutely. But I would think that the rates they get could be even 5-10 times lower than on Yahoo so in terms of advertising money from those ads, it’s not even close…yet

That being said…

I think that Yahoo will remain ahead of Facebook in terms of revenues for display ads for a long time but two main reasons explain why Facebook remains a much more attractive investment:

Facebook’s impressions will continue to skyrocket. The company is still growing very fast and improving its product enough to keep competition away. While I still think that Facebook will continue to get rates 5-10 times lower than Yahoo, I can easily imagine the social web king getting 5 times the number of impressions that Yahoo gets within a few years

Facebook has so many other possible ways to gain revenus. Display ads are one way to do it but we can easily imagine a dozen ways that Facebook will be generating revenues in the short to medium term. Comparing the two will be difficult to do because on so many levels, these companies are almost opposites…

Ok so maybe I have not remained entirely true to my title (no Yahoo bashing) but I do think that setting Facebook as the king of display advertising is premature and wrong, Yahoo still dominates that category, don’t take away the little that this company has:)

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