The NYT reports that today is of great interest at Yahoo as Yahoo fully launches their new contextual advertising matching routines. If successful, Yahoo’s profits could soar this year. Ironically it was Yahoo that aquired the company that effectively invented the pay per click ad model (GOTO renamed Overture now renamed Yahoo Publisher Network). This happened many years ago, but Yahoo failed to capitalize on the head start and it was Google that created a brilliant ad matching algorithm. This ad matching routine allows Google to make a lot more money per visitor than Yahoo and other search engines. Since Google also has a lot more search visitors, their profits have been skyrocketing while Yahoo and Microsoft search profits have languished.It’s interesting to think how little tweaks can quickly impact the amount of money flowing through these systems. Google makes over ten million per *day* from online ads, Yahoo much less but still millions per day. Thus if, for example, the matching routine screws up for a *few hours* and shows irrelevant ads Google can lose millions of dollars in revenue. Conversely if Yahoo can match Google’s ad matching prowess with the new system there’s a lot of money they’ve been effectively leaving on the table that’ll flow into Yahoo’s revenue stream and profits.
Disclaimer: I have some Yahoo Stock.