The History of PPC: Yahoo!
In the next
in my series on the history of PPC, I’ll be looking at Yahoo!, known as one of
the top tier in the paid search market. According to Josh Dreller on SearchEngineLand.com,
Yahoo carried an 18.8% market share as of 2010. Yahoo has 700 million online
visitors a month and may ring up more than $1 billion in profit for 2011,
writes Jon Swartz on NewsFactor.com.
According to their media relations page, Yahoo is “a leading global Internet
communications, commerce and media company that offers a comprehensive branded
network of services to more than 345 million individuals each month worldwide,”
that includes 25 world properties, with offices in Europe, Asia, North and South America. This all started in a trailer on the
campus of Stanford
University.
First
created in 1994 by David Filo and Jerry Yang, while Ph. D. candidates in
Electrical Engineering, this was a way to help them categorize and inventory
their interests on the net. Once they started to compile lists, other
categories arose, and then sub categories. It became more than a project, but a
necessity in order to use the net efficiently. As I wrote in an earlier post,
the site was first known as “Jerry and David’s guide to the World Wide Web,”
and then became “Yet Another Hierarchical Officious Oracle” Filo and Yang, according to their media
relations page, insist they selected the name because they liked the general
definition of a yahoo: "rude, unsophisticated, uncouth.”
The guide
grew in popularity, so much so that it received its first millionth-hit day in
the fall of 1994, which meant it was receiving 100,000 visitors. Seeing the
potential for a new business, the partners incorporated and started looking for
investors. Sequoia Capital agreed to invest $2 million in the spring of 1995.
Tim Koogle was hired as the first CEO, and Yahoo! launched in 1996 as an IPO
with 49 employees.
In the
beginning, Yahoo’s revenue was generated by banner advertising. On FundingUniverse.com,
Yahoo sold space on its web pages to companies promoting their products. The
banner ad not only acted like a billboard, but also linked the user to the
offer. This was an innovation at the time, because no other type of media was
able to deliver customers to an offer so quickly. It also sold traffic to
websites in order to promote their offers. Yahoo then began to expand, offering
online news, chat, their own email brand, etc.
At this
time, GoTo was the innovator of paid search, and grew quickly. Pay per click at
the time was becoming a more attractive option as a cost cutting form of
marketing. Yahoo did not initially focus on this option, but would soon make it
a priority. “GoTo’s pay-for-placement model was very successful. Spectators theorized
that the web had matured in the intervening two years, and these type of
economic models were more acceptable since the web was no longer just a place
for academic research, but also a place for buying products,” according to
James Zol, on QualityScores.com’s blog.
Yahoo,
recognizing the growing market of competitors, began to acquire its neighbors
in the market. One of those acquisitions was Overture, formerly known as GoTo.
Yahoo had been supplying Overture with traffic, but then took over the company
in order to take advantage of its search capability. This also included
InkTomi, another pay per click engine, which helped build their PPC traffic. They
did not stop there. “During the years 2000 to 2004, Yahoo! acquired thirteen
companies: Arthas.com, eGroups, Kimo, Sold.com, Launch Media, HotJobs, Inktomi,
Overture Services, Beijing
3721 Technology Co. Ltd., FareChase, OddPost Inc., MusicMatch, and Kelkoo. Web
traffic increases have also played a part.
By March of 2004, the Yahoo network of properties received some 2.4
billion page views per day,” according to FundingUniverse.com. These were then
rebranded under Yahoo’s flag.
Overture
became a boon for the larger search engines. “Through partnerships, Overture
enabled portals such as MSN and Yahoo! to monetize the hundreds of millions of
web searches made each day on their sites. Indeed, these partnerships proved
highly lucrative, and in a period otherwise marked by dot-com failures, Overture
became a substantial profit driver for portals like Yahoo!,” according to
QualityScore.com. Josh Dreller, on SearchEngineLand,
reiterates: “The transparent, auction-based, pay-per-click model we see now in
paid search had become the standard.”
Yahoo
became one of the top three alongside Google and Microsoft, dominating the
first decade of the 21st century. Paid search, predicted to be the
main stream for online business advertising, continues to grow at a clip. Meanwhile,
new competitors have entered the field. Facebook has expanded its sponsored ad
business, and has made a profound effect.
Recently, because of the
growth of Google, and the expansion of Facebook’s advertising, Yahoo has lost
some ground. Yahoo, Microsoft and AOL recently joined forces in order to
compete in the display ad market. Rip Empson for TechCrunch writes,
“the three internet behemoths today announced agreements that they hope will
improve the process of buying and selling premium online display inventory. In
other words, the agreements will allow each to offer the other’s display ads to
their respective customers.” This power play was also to help fend off the
onslaught of new social media and Google.” What’s more, while this may improve
the process of buying and selling online display inventory, it’s also a play to
fend off the meteoric rise of Facebook (and, in turn, Google, which owns a 75
percent share of search advertising). Really, everyone is spending more time on
Facebook, what with their measly 800 million users, and advertisers are
following them there.”
On the New
York Time’s website,
Nicole Perlroth writes, “Yahoo’s share of the online ad market declined 11
percent last year, down from 13.3 percent in 2010. While Google’s share grew to
40.8 percent, from 38.5 percent, and Facebook’s share reached 6.4 percent, from
4.6 percent for the same period, according to eMarketer.”
Just this
past week, Jerry Yang resigned from the board of directors to pursue other interests.
According to Jon Swartz on NewsFactor.com, Yang has a “mixed legacy.” Spurning
a $47 million buyout from Microsoft, Yahoo is now worth $19 billion. “Yahoo has
700 million online visitors a month and may ring up more than $1 billion in
profit for 2011. Yet, Facebook has stormed past it in online display ads in the
U.S.
for the first time, says eMarketer, and Google is closing in,” Swartz writes.
New CEO
Scott Thompson, the former president of PayPal, has taken over the company. He
was recently quoted on Reuters
that reviving his company’s advertising was his highest priority, and that we
need to “do better.” It will be interesting to see what new innovations will
appear in the coming year, as the company looks for ways to redefine itself.
In my next
post, I’ll be looking at Microsoft, and its paid search engine, Bing.