Yahoo to refocus advertising and user experience after 13% decline in revenue

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As Yahoo sees a drop in revenue, the online giant is refocusing to build out its ad offering and the user experience on its site.

In yesterday's sales call, Yahoo reported revenues of $1,573 million for the second quarter of 2009, a decrease of 13% from the second quarter of 2008. The decrease was driven by a 15% decline in search advertising revenue and a 14% decline in display advertising revenue.

To address this drop, Yahoo is investing $75 million in the third quarter in its advertising infrastructure and user experience. The advertising updates include refining the user experience with ads and getting rid of what Yahoo CEO Carol Bartz calls “irritating ads” and “high frequency ads” which can detract users.

“We are now focusing on improving relevancy, decreasing frequency and potentially eliminating other ads to increase user satisfaction and engagement,” said Bartz. “Better user engagement delivers better ROI to advertisers.”

To drive this ROI, Yahoo will focus its efforts on its top 200 advertisers across the network, as well as offer new ad solutions through the Smart Ads platform and the My Display Ads, a service that launched in beta last year to help small businesses run ads on Yahoo.

Yahoo will also focus on the role of local ads, which is the underlying idea behind the new partnership with AT&T Interactive. Under the terms of the partnership, AT&T's advertising sales force of more than 5,000 will sell Yahoo display inventory to local businesses across the United States. The collaboration adds Yahoo's display inventory to AT&T Interactive's existing local online advertising portfolio.

To improve on the user experience Yahoo has revamped its homepage in which consumers can personalize their Web and mobile Yahoo homepages by adding apps and customizing their profiles. Whether a Facebook app or a Gmail app, users' favorite apps can live on their Yahoo homepages.

“Our vision, quite simply, is to strive to be the center of people's online lives,” said Bartz.

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