June 20, 2007, 12:00 AM

With a new/old CEO at the helm, Yahoo sets a course for…where?

For sure there will be changes now that Yahoo co-founder Jerry Yang has taken over the top spot at the No. 2 search engine. Less clear is how he plans to slow down the Google juggernaut and how his strategy might impact e-retailers.

Yahoo Inc.’s seemingly abrupt announcement this week that CEO Terry Semel was stepping down in favor of company co-founder Jerry Yang makes sense in the context of visible internal and shareholder unease in the past year over Yahoo’s failure to keep pace with top search engine Google. What the change at the top of the No. 2 search engine will mean for online retailers is less clear, and may not be evident for some time, say observers contacted by Internet Retailer.

“I don’t think it will have any impact on retailer initiatives for this year as much as looking out to next year,” says James Okamura of J.C. Williams Group Ltd., a consulting firm for multichannel retailers. “That’s when we might see some more changes with Yahoo’s strategy.”

Among the areas of interest to e-retailers that Yang might address are Yahoo’s new Panama system for placing ads against search terms, and social networking initiatives. And, while Yang says he sees Yahoo remaining an independent company, there is speculation the company could ultimately align itself more closely or even merge with such companies as Microsoft and eBay that, like Yahoo, find themselves increasingly in competition with Google.

Other combinations are also possible, particularly involving media companies seeking a stronger online presence. Indeed, reports today in two major newspapers, The Times of the UK and the New York Times, said News Corp., the international media conglomerate owned by Rupert Murdoch, was discussing swapping the social networking site MySpace that it acquired two years ago for a 25% or 30% stake in Yahoo.

Acquiring MySpace would instantly convert Yahoo into a leading player in social networking. And that is an area where retailers are looking for partners that can help them test the waters of a fast-growing online development without making major investments, says Okamura, whose firm has been consulting with Yahoo on social media.

With the investments it already made in social networking sites, such as its 2005 acquisition of photo-sharing site Flickr, Yahoo is in a position to let a retailer dabble in social networking, such as by creating a photo essay tied to a marketing campaign, Okamura says. “What Yahoo is doing is allowing retailers to make some calculated strategic bets without blowing the budget.”

Another initiative certain to get close scrutiny by Yahoo senior management is the company’s recently released Panama search ad platform, which mimics Google’s approach of placing at the top of the page those ads that consumers are mostly likely to click on, thus generating revenue for the search engine. Previously, the highest bidder won the top spot on Yahoo’s search results pages.

“The reviews of Panama have been positive, but not overwhelmingly so,” says Stefan Tornquist, research director at online research firm MarketingSherpa Inc. “It’s not the kind of sea change that’s going to flip-flop budgets.” Still, Tornquist says advertisers will continue to invest some of their budget dollars with Yahoo if only to keep Google from becoming too dominant.

Panama is a crucial initiative, but the technology is new and advertisers are still getting comfortable using it, says David Card, lead media analyst at research and consulting firm JupiterResearch. “They need to make Panama work or get rid of it,” he says, “but it would be crazy not to give Panama a chance at working.”

Card notes that Yahoo is different from Google in that Yahoo keeps visitors on its sites with its wide array of content in such areas as news, shopping, maps and jobs, while Google is primarily a search engine that sends users to other sites. For instance, data from Internet research firm Compete Inc. shows the average visitor to Yahoo.com stays more than 11 minutes, compared to under 6 minutes for a visitor to Google.com. “Yahoo, in contrast to Google, has the potential to create a marketing platform for people buying ads on their site that is more rich and flexible,” Card says. “You could buy search, display, video, rich media. They need to do that.”

He says Yahoo does a good job at selling prime advertising spots, such as on the Yahoo home page, but must do a better job of selling less attractive, or remnant, positions. “They need to make search work better and as a company they need to monetize remnant inventory better,” he says. “It means they will have a better product for marketers if they fix those issues.”

Card also notes that Yahoo’s top management will be occupied for some time with filling key executive positions, which might delay other initiatives. Susan Decker, who had been heading up the Advertiser and Publisher Group has been named Yahoo’s president, leaving her previous spot unfilled. And Yahoo is still looking to replace its recently departed chief technology officer, Farzad Nazem.

“They have to decide whether they want to promote or bring people in, or whether the new CEO or president wants a different organization,” Card says. “Something like that is likely to occupy their thinking before they would make changes that would ripple down to the day-to-day running of the business.”

 

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