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Yahoo: Why advertisers are standoffish

(MoneyWatch) Yahoo's (YHOO) earnings announcement reinforced the central difficulty that CEO Marissa Mayer and her predecessors have faced: Advertisers aren't hot for the property. That may seem obvious -- display ad numbers and rates dropping -- but seldom do you hear from the advertising community itself on what is wrong and why advertisers may shy away.

MoneyWatch asked some agencies about the problems they see. And although they were generally careful to praise Mayer for investing in new technology to update how the company can deliver ads, there are still concerns over what Yahoo will ultimately do -- and how long that might take.

One of the major problems for Yahoo is that online display ads have become a commodity, according to Matthew Witt, director of digital integration at Chicago-based ad agency Tris3ct. "Multiple studies have shown brand recall for display lags behind standard channels such as television and magazine print."

"In terms of real revenue growth, the big challenge is that brand marketers and agencies alike still see Yahoo as a news and entertainment portal," Witt said. "The real growth potential for the company is selling itself as a comprehensive creative advertising platform."

Sean Corcoran, senior vice-president and director of digital and social media at Mediahub/Mullen, said, "It's not that agencies and brands are passing on Yahoo so much as the competition for digital dollars is increasing by the day despite the growth in digital spends. In addition to that, Yahoo doesn't have the brand cachet it once had, as they've been surpassed by new big players in the space like Facebook and Twitter so they have to work harder to earn their way into a media plan than in the past."

As Anthony Iacovone, CEO of mobile ad network AdTheorent, says, "While we believe Yahoo! is a strong inventory source, we have had great experiences working with smaller supply sources that offer more flexibility, such as monthly minimum buys."

An executive at a major retail chain who asked not to be identfied, said that consumer-generated media, like social networks, have become powerful competitors to traditional ads, with one recent campaign gaining a 28 percent sales increase for a store-branded product line.

On the positive side, Yahoo's recent acquisitions have given advertisers some hope that things could, eventually, turn around. "Yahoo has made a number of small-scale acquisitions in the mobile space focused on bringing in new talent which tells us product innovation will be at the core of their offering moving forward, and we're seeing that already take effect with a more intuitive, elegant design of their mobile apps," says Susan Schiekofer, president of the digital group at media buying and planning firm MEC.

"Additionally, the Tumblr acquisition has provided a credible social offering that creates an effective pathway to reach and engage millennials, a pathway which didn't exist prior to the acquisition, so that's a step in the right direction," Schiekofer says. Some of MEC's clients, like AT&T, and other companies like Warby Parker have tested Tumblr's ad offerings. But, from the agency's view, it will be important that Tumblr is allowed to operate independently of Yahoo.

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