Yahoo's Surge in Ad Revenue Is Even Better than It Looks

Here's a company you weren't expecting to hear good news from: Yahoo. The company announced, in its first quarter earnings call, some positive momentum in online ad sales. But this isn't just good news for Yahoo -- it's great news for prime online content sites.

Yesterday, the beleaguered portal announced a 20 percent gain in display ad revenue, and a 24 percent increase in "guaranteed display," which consists mainly of premium ad inventory. So why isn't this news just about increasing economic confidence among advertisers? Because It also signals that the pendulum may be swinging away from ad networks and ad exchanges, which have damaged the revenues of key sites, even as many of those sites post robust traffic numbers.

Networks and exchanges work much differently than traditional ad sales by pooling inventory across thousands of sites, using things like behavioral targeting, which target advertising based on what sorts of things a user is doing online. (Someone who has been perusing car sites lately might be targeted with car ads, for example.) As a result, the content the ads are appearing against largely ceases to matter. That, in turn, has devalued advertising on high-profile, respected properties like Yahoo.

But there are downsides to this approach, even though it allows advertisers to collect lots of eyeballs cheaply. They can't always figure out where their ads are running, and there's something to be said for association with the right content even if that's difficult to quantify. There's a reason, beyond mere demographics, that an advertiser like Tag Heuer can habitually be found within the pages of Vanity Fair: it builds the prestige of the brand simply by association.

Ad networks and exchanges are not going away. They are here with us to say, and they help support the broader economy of the Web. But quality counts, too, and maybe Yahoo's results mean that realization is beginning to sink in. For the dozens of premium content publishers who have been hammered by the recession, that's a good thing.