Knowledge is the Foundation To Success  

Jerry Yang, who co-founded Yahoo in 1995, is stepping down after 17 challenging months as CEO. Yang, 40, will remain CEO until his replacement is hired and then revert to his previous advisory role of “Chief Yahoo.”

Failed Microsoft Buyout

Things became particularly interesting for Yang about six months back, when Microsoft attempted an unsolicited buyout for roughly $33 per share, which was a generous premium to Yahoo’s $19 stock price at that time.  Unfortunately for Yahoo shareholders, at least in the short term, Yang vocally resisted this opportunity and took measures to ensure that it would not come to be. Today, Yahoo’s stock price sits under $9 per share just six months later, the lowest level since 2003.

Microsoft might come back to the table, but just yesterday Steve Ballmer said, “We’ve moved on,” during a shareholder meeting in Bellevue, Washington. He reiterated that a partnership between Microsoft and Yahoo in the Internet-search market is “an interesting possibility.” However, Ballmer added that there are no talks about such a partnership at this time.

Google Backs Out of Partnership

Some are speculating that the final blow to Yang recently came from Google, who backed out of a proposed ad partnership to avoid a potential anti-trust battle with the Justice Department.

YouTube Surpasses Yahoo

Earlier this week, Comscore data revealed that YouTube surpassed Yahoo as the second most popular search service, receiving 2.6 billion search queries in August, 2008 compared to Yahoo’s 2.4 billion queries. The rapidly growing online video marketplace represents yet another area that Google dominates.

In a memo emailed to Yahoo employees Monday announcing his resignation, Yang wrote, “All of you know that I have always, and will always bleed purple. I will always do what I think is right for this great company. While this step will be an adjustment for all of us, I know it’s the right one.”

Yahoo needs to do something in order to prevent their one time search engine dominance from deteriorating into obscurity. Yahoo still boasts 500 million users worldwide, but increasingly every month, more and more are turning to Google for their search needs.

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A blog entry released earlier today (view here) by David Drummond, Senior Vice President and Chief Legal Officer with Google, publicly announced Google’s decision to walk away from a planned partnership with Yahoo! (view details about the agreement here). This is not a huge surprise, as the deal was recently delayed, but it is now official.

The blog states, “… after four months of review, including discussions of various possible changes to the agreement, it’s clear that government regulators and some advertisers continue to have concerns about the agreement. Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners. That wouldn’t have been in the long-term interests of Google or our users, so we have decided to end the agreement.”

In response, Yahoo! said it was disappointed by Google’s decision and maintained that the abandoned partnership would have been beneficial for everyone. Yahoo! just lost out on hundreds of millions of dollars in additional annual revenue that would have resulted from the deal. Yahoo!’s statement also said that they are, “disappointed that Google has elected to withdraw from the agreement rather than defend it in court.”

Several analysts speculate that losing the Google deal will make Yahoo! more likely to revisit a possible deal with, or outright buyout from Microsoft. Details of the Google-Yahoo! partnership put up significant barriers to a Microsoft buyout – barriers that no longer remain. Yahoo!’s stock price finished up today despite the DOW plunging 486 points, likely due to investor speculation and hopes for renewed buyout potential. We’ll see how this plays out, but I’m confident that Microsoft execs are talking about this situation as I type. Tic toc. Tic toc. Time will tell if Microsoft will come back to the table. In the meantime, Google continues to expand their search dominance.

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Here at JumpFly, we’ve been receiving numerous emails from Yahoo Search Marketing about keywords that are pending inactivation, which means it’s time for another round of bid raises in Yahoo.

Yahoo Minimum Bids Increasing

Yahoo has been periodically raising minimum pay-per-click (PPC) bids on various keywords, and to me, there is no rhyme or reason. Some minimums are only being raised a small amount, like ten cents. But some of the increases are ridiculous including increases of thirty, fifty, even seventy-five cents. Supposedly the minimums are determined by competition – the more competitors, the higher your minimum bid must be (which sounds like a nice way for Yahoo to make more money). It’s also supposed to be determined by how relevant searchers find your ads. The better your CTR versus your competitors, the lower your minimum bid should be.

This doesn’t happen very often, where we have two clients with the same search terms, but I have one situation where this has happened. I have two clients with the same term, and in the last round of changes back in September, both of them were required to increase their minimum bids. Both had a CTR of well over 3%. When I emailed my Yahoo rep to find out about why, I was told that it was probably because of too much competition. Now when I checked, there was a total of four advertisers on the term. And the minimum bid wasn’t a minor increase, but a really major increase. For one of my clients it went from $.29 to $1.12. The other one was required to go from $.29 to $.86. And now, there’s one lonely (and probably happy) advertiser on this term.

Here’s another instance that really burns me up. I have a client who is advertising on their own URL, which is something we recommend doing. Yahoo wants them to increase their minimum bid from .93 to 1.56. On their own URL.

Another annoyance – we get Minimum Bid Increase notices on keywords in old campaigns that haven’t run for a long time and are paused. It would be nice if Yahoo would take into consideration that paused campaigns don’t need to have notices sent. The only thing to do to stop the notices is to delete the keywords or campaigns, because Yahoo doesn’t care if the search terms themselves are paused.

I don’t know if Yahoo has noticed an actual decrease in revenue, but a lot of the bid increases that Yahoo is making are souring my clients on Yahoo even more than they have been in the past. Most of them are spending LESS on Yahoo than before, because some of the bid minimums are so ludicrious that it doesn’t make advertising on them worth it. They should take a look at what Google is doing – they’re doing AWAY with inactive bids, and Google keeps gaining share, not losing it.

Something else to keep in mind: just because you’ve gone through a round of bid minimum changes in the past doesn’t mean you won’t get them this time. Make sure to keep an eye out for the email, and continue to check your Yahoo account for them, because there’s no rhyme or reason on when and what keywords might get flagged. And once they’re flagged, you need to determine the ROI on the increase so you can decide if you’re willing to pay the price or respectfully decline by deleting the keyword.

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