Yahoo: Strategy Shift or Part of the Plan?

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Yahoo direct marketing services? It certainly sounds like an oxymoron. When the portal announced earlier this month that it had agreed to acquire Internet direct marketing firm Yoyodyne, Irvington, NY, for $30 million in stock, many saw it as a sign that arguably the biggest online brand finally realized that the Net is inherently a direct marketing medium.


However, Yahoo chief operating officer Jeff Mallett said direct marketing has been part of the big picture all along. As of the end of September, he said, Yahoo had 25 million registered members. And recent test e-mail marketing garnered enough response to put DM on the front burner at the Santa Clara, CA-based company.


Though Mallett wouldn't say how many of Yahoo's members have opted in to receive e-mail marketing messages, he said the company can offer advertisers e-mail universes "in the millions." In early October, Yahoo began making its members available to marketers in preparation for the holidays.


<B>DM News:<B> Some saw the Yoyodyne acquisition as evidence that [Yahoo the brander] finally understands that the Internet is a direct marketing medium. Is that being too hard on you?


<B>Jeff Mallett:<B> Yes, a little bit. You've actually got it backward. We just started to get the critical mass, which allows people to build brands. Banners and keywords [the type of advertising marketers have been buying on Yahoo for three years] are primarily [aimed at] selling things, and secondly [aimed at] customer name acquisition. All of the promotions off our front page have been by companies like American Express, who do promotions to build databases of names.


<B>DM:<B> But you wouldn't be the first company who has been direct marketing on the Internet without realizing it.


<B>JM:<B> Once again, direct marketing has been inherent in what we've done all along. No, we haven't called <I>DM News<I> to say, "This is our direct marketing strategy." Yes, we've stepped it up from an acquisition standpoint. And, yes, we've just started officially offering it [reaching Yahoo users] as a service. You are right that we've just recently begun looking like a direct marketing company, but it's always been imbedded in our thoughts.


<B>DM:<B> Do you expect the other portals to follow suit?


<B>JM:<B> If history tells the tale, they usually watch what we do. Within a couple of years, three, maybe four, globally-branded Web networks are really going to pop to the top. We think that AOL has earned the right. We think that although Microsoft hasn't hit the ball out of the park, they are finally catching on, and just because they're Microsoft, they're probably going to be there in some form or another. And at Yahoo, we hope that we've earned the right to be there. If you're striving for that brass ring, direct marketing better be a part of your external business, and you better have a base of members that are permitting you to [market to them directly].


<B>DM:<B> What would you say most companies don't understand about the Internet?


<B>JM:<B> In direct marketing speak, it's test, test, test; nothing's set. This medium is changing on a daily basis. This isn't like print or television, where there's history and you kind of know what you're going to get. How you get your message out and how you touch customers is constantly changing. A lot of organizations out there don't have that fluid kind of mindset. Second, you've got to have a compelling offer. Consumers are consumers [even on the Net] and they have a limited amount of time. Unless you have a compelling offer, off they go. [The Internet] is the most people-powered medium we've ever seen. Put your "A" team on promotions and messaging.


<B>DM:<B> A lot of advertisers buy Yahoo because of the name, not because they know it works. If people start really testing on the Internet, they may find that Yahoo is not an efficient ad buy.


<B>JM:<B> Ever since we put the first ad on Yahoo in August of 1995, we have been measured like you wouldn't believe. We would not continue to garner the number of advertisers we have and $53.6 million in revenue [Yahoo reported] last quarter unless we were giving something back. We've been justifying a disproportionate amount of ad revenue out of the market because people have been measuring us. There's no doubt we did get on people's buys because someone's boss's boss only knows Yahoo, and its a safe way to test the Web. But at the end of the day, the people who crank the numbers and have to justify their existence [have options]. It's not like there's a lack of inventory and it's not like we're the cheapest. So I say "measure away."
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