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Yahoo! Dominates Ad Banner Market

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With the news focusing on Microsoft’s intentions to challenge Google’s dominance in the search engine industry by merging with Yahoo!, many may have forgotten that Yahoo! is still a force when it comes to online advertising.

According to analysis of data from Nielsen Online, JPMorgan and other sources published in February’s OMMA Magazine, Yahoo!’s $12.65 CPM (cost per impression) was three times greater than Microsoft’s MSN, 50 per cent greater than MySpace.com and around four times greater than AOL.

From December 2006 to November 2007, Yahoo! made nearly $1.4 billion in advertising revenues and had over 33 billion page views.

According to AdJug, the online advertising marketplace, a number of key acquisitions by Yahoo! contributed to the company’s success.

"Yahoo! has made very clever acquisitions in the display space. Until the acquisition of Overture in 2004, Yahoo’s bread and butter had always been display advertising. They have had lots of time to work on building a great display business. This year they acquired BlueLithium & RightMedia - both very solid display ad businesses," said Satish Jayakumar co-founder and director at AdJug.

However, despite research showing that in total, Yahoo! accounted for nearly one-fifth of online display spending in 2007, Yahoo!’s RPM (revenue per thousand) was considerably lower than sites such as MSNBC.

"Some of Yahoo’s weakness is also reflected in these results, since even with the large number of impressions, the RPM was lower than more targeted Web publishers such as Weather Channel, MSNBC and ESPN," said David Hallerman, senior analyst at eMarketer.

eMarketer predicts that although other forms of online marketing are growing, display ads will still account for about one-fifth of all online ad spending in 2011, second only to spending on search.

Some sceptics still question the role of banner ads in an industry where innovation is strong and audiences are becoming increasingly media savvy and less receptive to brand messages.

Jayakumar believes that rather than hinder the growth of the banner ad industry, new technology such as better targeting will actually fuel its growth and improve its effectiveness.

"Banner buying has traditionally gone with the mass reach/cheapest cost option where advertisers spread themselves thinly across as many users as possible. This approach lacks any targeting of the user, which has resulted in people ignoring ads on pages, or banner blindness. More precise buying and better targeting systems will increase the effectiveness of banner ads," he said.

However, according to Brendan Condon, MD of Advertising.com International, advertisers need to take begin taking risks if the market is to continue to grow.

"Everyone struggles to adopt the latest technology so we shouldn’t be surprised that advertisers are hesitant too. Risk is a serious concern, particularly as marketing budgets tighten. Advertisers want to be assured that new developments in online advertising hold real value in meeting business goals and driving ROI. In an increasingly competitive marketplace, where the amount of spend and the number of new advertisers far outstrips the number of new users, more brands are realising that there is an even bigger risk in not changing to more advanced solutions."