14 DAY TRIAL // Yahoo has been trying to revamp itself and turn its fortunes around for several years now. No matter what it does though, it seems that each quarter is worse than the previous and the much awaited turn-around is still not happening.
Yahoo's latest quarterly financial report had some (few) encouraging numbers, but was mostly below expectations, which were low in the first place.
This while, as a New York Times report highlights, user numbers are growing or, at the very least, are not going down. Yahoo still has some of the most visited websites in the US and in the world.
But it can't manage to convert those visitors into revenue, at least not as well as its competitors.
One problem, particular to Yahoo, is what one Yahoo exec, Ross Levinsohn, responsible for the Americas market, calls the "commoditization" of the ad market, the display ad market in particular, which also happens to be Yahoo's biggest revenue earner and its key strength.
Yahoo has traditionally done very well with display ads, big, flashy ads on its homepage and its other pages. The number of visitors its homepage still attracts means that it has some prime ad real estate.
In the past, it's been able to sell this to big advertisers directly, via its advertising team, at a premium, accounting for a big share of its overall revenue.
Only when it couldn't sell the ad space directly, what Yahoo calls "Class 1 display" it resorts to ad exchanges, marketplaces that bring ad buyers and sellers together. Yahoo dubs this "Class 2 display."
As with any marketplace, the number of players competing for the same money drives prices down, so Class 2 display ads fetch a much lower price than what Yahoo is able to get through direct sales.
The problem is that Yahoo can't manage to sell as many ads directly as it did before and this is not about to change any time soon, in fact it is very likely that the trend will continue.
This means that even if Yahoo manages to sell more ads and get more visitors, it's revenue numbers may still go down.