According to the latest Comscore data, Yahoo sites still generate the most unique visitors of any internet property (121,962,000 as compared to Google’s 85,685,000). 

This is no surprise, as Yahoo is a content play before anything else.  With thousands and thousands of pages of proprietary content, discussion groups, forums, email, and everything else under the sun, being a search engine has never seemed to be the biggest priority in Sunnyvale.  With all these page views— one would think that Yahoo would reap enormous revenues. 

According to Yahoo’s own finance page on their business, Yahoo posted gross revenues of $1,817,602,000 for the first quarter of 2008.  By dividing gross revenue by the latest Comscore data on unique visitors (extrapolated to be representative of the same 3 month time period), Yahoo appears to have grossed $4.96 per visitor per month.  And, using a 41.5% cost of revenue (calculated using data from the same balance sheet), that would effectively reduce Yahoo’s net profit to $2.90 per user per month.  Yahoo claims to average 3.4 billion page views per day.  That’s 102 billion page views a month.  So, if my math is correct, Yahoo makes about $0.017 per page view.

When you are talking about how much money you make per page view, less than 2 tenths of a cent per page isn’t too good.

Compare this with Google.  By the same calculation, Google posted gross revenues of $5,186,043,000 for the same period.  Divided by the number of users in the Comscore report, adjusted for time, that equates to $20.17 gross, or $11.90 net per user (profit margin being calculated in the same manner).  Good luck finding accurate page view per user data from Google— so, let’s just say it is 2.7B (thanks to SearchEngineWatch for the guess).  That means, by the same calculation, Google makes $0.52 per page view (that’s 30X more per page).

Now, I’ll be the first to admit that this math is absolutely and completely flawed beyond being in any way accurate.  It fails to take into account any variables that exist, including revenue from other sources (content network, partnerships to name a few).  But, I would argue that this analysis is “directionally correct” at the very least, if not true to scale.

Although terribly simplified, this analysis does illustrate the problem Yahoo has.  All the users in the world are worthless if they don’t generate revenue.  That’s why Yahoo’s stock is at $21.45 (as of June 22) and Google’s is $545.21. 

But, don’t count Yahoo out— it takes many years, millions of dedicated users, and billions of dollars to generate the depth of content Yahoo has across its properties.  Search is easy, serving ads is easy.  A recent deal with Google might finally give Yahoo the means to better monetize that traffic.  Combine that with true dedicated usership, and Yahoo still might have a chance to win in the end.

It is possible.

Here’s something you don’t see every day:

A San Francisco photographer posted pictures on Flickr (yes, Flickr and not Picasa) of the Google Maps “Street View” camera vehicle pulled over by the police in the Presidio.  It seems that a SF motorcycle cop found the enormous apparatus mounted to the roof of this lady’s Prius to be a little suspicious.  Either that, or she was speeding. 

I have always wondered what Google’s camera apparatus for Streetview looked like, and thanks to Damian Spain, now I know.  Some bloggers are speculating what the hardware included– with some convinced Google is working on collecting 3D data for some new functionality to add to Street View.

So, now we know what it looks like.  And, the next time you see a hybrid vehicle with a 5-foot camera array following you down the street, don’t miss your chance.  Do something visible and memorable for the camera, write down where you were when you saw it, and watch for it on Google Maps.  When else will you get a chance for such fame? 

Merely a few short weeks after Microsoft officially withdrew it’s bid to purchase Yahoo, Google has come into the picture with a corporate mashup that is sure to peak the interest of Capital Hill’s antitrust legions. 

June 12th, Yahoo put out a press release stating its intention to “strengthen [it's] competitive position in online advertising through [a] non-exclusive agreement with Google”.  By the terms of the agreement, Yahoo will now serve Google Adwords advertisements alongside their own, both in search results and on Yahoo’s thousands of highly-trafficked (but poorly monetized) content pages. 

Ads will also be shows on member’s sites within Yahoo’s Publisher Network, which has never seen the adoption of Google’s Adsense program, but still gives Google a boost in content ad placement inventory. 

This agreement is non-exclusive.  Meaning, Yahoo is free to pursue similar deals with other ad providers.  They are even still free to pursue acquisition by Microsoft, although that would carry a $250 million penalty (termination fee).

According to an article in the Wall Street Journal, Yahoo claims that by better monetizing searches and other page views on their properties, they are projecting an extra $800 million in annual revenue.  And, that’s just the beginning— integrating other Google ad serving technologies on to Yahoo’s vast (and widely-used) user pages would certainly mean other opportunities.

It is all good news for Yahoo, whose leadership (Jerry Yang) have come under intense scrutiny from Wall Street, investors and Carl Icahn for missing an opportunity to sell the company for top dollar and subsequently causing a dramatic drop in market cap.  The deal is a positive move to add revenue security in an uncertain time for the internet sector.

Certainly, this deal is going to be reviewed under an electron microscope by fair-trade officials and monopoly watchdogs at the Justice Department.  In fact, Yahoo has claimed that the deal will not go into effect for as long as three and a half months to permit time for thorough regulatory investigation.  Likely threatened by a Google-Yahoo partnership, Microsoft is expected to apply significant political pressure to add further hardship to making the execution of the deal a reality.

So, as a Google/Yahoo mashup appears to be in our near future, I propose the following names:

• Yahoogle
• Goohoo

Today, I was looking through my server statistics for an account at one of the hosting providers I maintain, and I noticed something pretty funny and incredibly timely, considering everything that has been going on in the world as of late.  It seems that I’ve been getting a lot of traffic from Yahoo Local from searches for “gas prices in Chicago”.  This brings back some good memories:

It was about three years ago that someone forwarded me a chain email that was a plan to fight high gas prices.  The idea was to boycott Exxon Mobil.  The email claimed that by doing so, it would force the world’s largest oil company to react by lowering their prices, in order to “drive more traffic” to their stations.  The smaller competitors, faced with increased price competition from the giant corporation, would have no choice other than to respond by lowering their own prices.  Although completely unrealistic, the theory actually made some sense.

At the time I read this email, I was part of a small internet startup called LocalLaunch.  We focused almost exclusively on local internet marketing.  At that time, this was a specialization which very few companies had.  So, I spent a lot of time thinking about how to generate internet traffic from geographically qualified searches.

One of the early search properties to launch specifically serving the local small business market was Yahoo Local.  Yahoo Local integrated a directory taxonomy with very basic social networking tools (in the form of user reviews).  The earliest version ranked its results based on a fairly crude algorithm which calculated relevancy, ratings, and distance. 

Herein lies one of the biggest challenges with truly local targeting on the internet.  Every connection to the internet is provided with a unique IP address that can be used to indicate the location of the user, so it very often gets used in the targeting of search advertising results.  When a user searches for “gas stations” with no further geo-qualification, it makes sense that they intended to find a business close to their location.  IP targeting works fairly well when covering a large area, but it becomes significantly less accurate when the target is localized to a specific part of a city, neighborhood, or a radius.  This is because IP addresses are provided by internet service providers (ISPs).  Depending on where you live and what web service you use, your provider might not be hosted locally.  The result is that your IP address may indicate that you are sitting far from where you are actually conducting your searches.

So, IP targeting does not work that well for true local plays, such as Yahoo Local.

Unlike the PPC engines (Google Adwords, MSN Adcenter, and Yahoo Panama); Yahoo Local does not use IP targeting to calculate the distance portion of it’s ranking algorithm.  Instead, it measures the distance between a business address and the “center of a city”.  The city center is calculated by doing a scattergram of all business addresses within a given city, and measuring where the business density is highest.  In the case of Chicago, that location is slightly West of downtown.  This is also done for zip codes, neighborhoods, etc.

This method of determining distance works pretty well, really.  A user searching Yahoo Local for “gas prices in Chicago” will be given results that are downtown, and a user searching for “gas prices in 60601″ will be given results that are in 60601.  Most of the time.

Yahoo Local has never been as hard to get into as Google Maps.  It is, in fact, quite easy.  Additionally, also unlike Google Maps, address verification has never been much of a priority.  So, when I received the chain email with the silly plan to fight high gas prices, it gave me the idea for a test.

I built www.neoactivism.com to test whether a site with no affiliation to an address could rank in Yahoo Local. 

I used the content of the forwarded email as my content.  I conducted my own estimation of the city center in order to pick an address to submit for my listing.  Guess what?  It worked.  I started ranking #1 in Yahoo Local for “gas prices” in “chicago”.  The experiment was a success!

That was before gas prices topped $4 a gallon, and they became one of the hottest topics in America.  Now, I am getting tons of traffic from my listing.  And, aside from some poorly constructed Adsense and Amazon affiliate links, the site has no revenue generation stream whatsoever. 

So, let’s hope that whoever originally wrote that chain email knew what they were talking about.  If so, perhaps some good could come of this, afterall. 

Yahoo has added an interesting revision to their Terms of Service impacting PPC advertising on Panama (see the section on “Sponsored Search and Content Match”):

“OPTIMIZATION. In the U.S. only, for those advertisers not bound by an Insertion Order, we may help you optimize your account(s). Accordingly, you expressly agree that we may also: (i) create ads, (ii) add and/or remove keywords, and/or (iii) optimize your account(s). We will notify you via email of such changes made to your account(s), and can also include a spreadsheet of such changes upon your written request. If you would like any of such changes reversed, please reply to such email within 14 days of the change(s), and we will make commercially reasonable efforts to reverse the change(s) you specifically identify. Notwithstanding the foregoing, you remain responsible for all changes made to your account(s), including all click charges incurred prior to any reversions being made. It is your responsibility to monitor your account(s) and to ensure that your account settings are consistent with your business objectives.“

My initial opinion is that this move seems radical.  Not only does Yahoo claim the right to choose which optimization tactics will best serve your needs (possibly including adding/removing keywords, creating new ad copy text, and anything else that might be deemed “optimizing your account”), they will implement these changes without your approval.  In fact, the policy states that they will alert you by email if such changes are made, and only supply details of the applied changes upon written request.  If you choose not to keep some or all of their changes, they will make a “reasonable effort” to change them back, but during which time you will be responsible for all charges incurred. 

Wow.  This is a pretty major shift in thinking.  While Yahoo probably thinks that these changes will always be well-received, as I’m sure they will do their best to truly make their program’s performance improve by doing this, systematically applying these changes with no formal consent represents a decrease in control for the advertiser.  As a provider of pay per click account management, I can tell you that saying “Yahoo did it” is not a suitable answer for the question “why did you write this ad copy?” or “why did you choose these keywords?”.

Lastly, I’m stunned by the final sentence in the policy, “It is your responsibility to monitor your account(s) and to ensure that your account settings are consistent with your business objectives”.  If Yahoo makes mistakes (which it is likely to do, not knowing the advertisers true objectives in advertising) and changes accounts to make them “more successful”, it is the advertiser’s duty to correct police them? 

It really sounds like a very, very bad idea.