Yahoo Struggles to Chip Into Google's Act Yahoo claims 500 million users around the world at a time when Internet advertising revenues are growing industry-wide. But Yahoo isn't doing anywhere near as well as Google. Recent management shakeups are part of Yahoo's struggle to capitalize on its big user base.
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Yahoo Struggles to Chip Into Google's Act

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Yahoo Struggles to Chip Into Google's Act

Yahoo Struggles to Chip Into Google's Act

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Put this way, Yahoo sounds impressive - an Internet company with 500 million monthly users and a market value of some $37 billion. But last month, Yahoo's CEO Terry Semel stepped down because Wall Street wasn't happy with how he was running the company. Yahoo just doesn't look so good, especially compared with that other Silicon Valley Company with the double O in its name, Google.

NPR's Laura Sydell explains why.

LAURA SYDELL: To understand the difference between Google and Yahoo, all you have to do is visit the sites. Google has one empty box where you type in what you're looking for. The search feature on Yahoo is buried among lots of links and graphics. Yahoo isn't as much of a search engine as it is a portal that offers users online services.

(Soundbite of Yahoo ad)

Unidentified Woman: How to land that perfect job?

SYDELL: There's Yahoo Hot Jobs, Yahoo Sports.

(Soundbite of a baseball game)

Unidentified Man: Nook Logan is out, rounding third. And the game is over.

SYDELL: And you can check out previews of the latest "Harry Potter" movie.

(Soundbite of movie "Harry Potter and the Order of the Phoenix")

Mr. ROBERT HARDY (Actor): (As Cornelius Fudge) The ministry of magic is pleased to announce the appointment of Dolores Jane Umbridge as high…

SYDELL: And there's Yahoo Music, real estate, tech, travel and banner ads everywhere. So if you go to Yahoo Real Estate, there's a banner ad for a mortgage company even if you just want to rent.

On Google, it's all about what you search for. Type in apartments to rent in San Francisco and no one is going to try and sell you a 30-year fixed mortgage. Because the search ad is more tailored to what you want, you're more likely to click on it. And every time you click, the cash register rings at Google, says Andrew Frank, an analyst at Gartner, a research firm.

Mr. ANDREW FRANK (Research Director, Gartner Incorporated): It's not just a matter of volume, it's also a matter of how much money you can make per click and per page view, which is where Google has really excelled.

SYDELL: And because Google is basically a search engine, it's easy for businesses to buy carefully targeted ads, says Rebecca Lieb, editor-in-chief of ClickZ, which provides news about interactive advertising.

Ms. REBECCA LIEB (Editor-in-chief, ClickZ): You log in to a Web interface, you select your keyword terms and phrases, and you log out and you have not interacted with another human being.

SYDELL: But Yahoo sells mostly banner ads, and that requires the input of designers and marketers.

Ms. LIEB: Yahoo is making very complicated sales of graphical advertising to ad agencies. It's a much more high-touch business. They have to go in, present, talk to people.

SYDELL: Yahoo is still number two among search engines. It only has 20 percent of the market to Google's 65 percent. Yahoo is now working to make its banner ads more lucrative. Half its users have registered with the company. So Yahoo has a great deal of personal information such as age, sex and geographical location. Earlier this week, Yahoo said it's buying a company called Smart Ads.

David Karnstedt, senior vice president of North American sales at Yahoo.

Mr. DAVID KARNSTEDT (Senior Vice President of North American Sales, Yahoo): And the whole idea behind Smart Ads is really to leverage information that people have provided to us to really create more targeted advertising.

SYDELL: So, for example, if someone is looking at vacations in Cancun on Yahoo's travel service, ads for airfares from their local airport might appear. A visit to Yahoo Movies would bring up an ad for a film that appeals to people of the user's age and gender. But Yahoo has to keep the user around long enough to see those ads, says ClickZ editor Rebecca Lieb.

Ms. LIEB: People hit Yahoo, check their e-mail and go. Yahoo needs to create more products and more awareness of products that really engage consumers and immerse them and make them stick around to be exposed to advertising and to other messages.

SYDELL: Yahoo better move quickly. Over the course of a few years, Google became the search leader. Now, they are nipping at Yahoo's heels with more portal-like services.

Danny Sullivan is editor-in-chief of search engine

Mr. DANNY SULLIVAN (Editor-in-chief, Google is actually doing more and more to try to get that kind of a portal audience - things like their calendar service, their finance service, the blogging services that they offer, the ability to have a personalized homepage.

SYDELL: Sullivan and others believe that the key to success is going to be increasingly targeted in personalized ads. Online advertising is expected to grow in the next few years. However, there will be challenges for Google and Yahoo. Both face more competition from MSN and AOL, and there is a growing course of critics who see that all the personal information these companies are gathering is infringing on individual privacy. It's also possible in this still young and dynamic Internet marketplace that a new company could suddenly emerge with a better technology that nobody can foresee.

Laura Sydell, NPR News, San Francisco.

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