Yahoo to Sell ‘Contextual’ Website Ads

Times Staff Writer

Yahoo Inc. today plans to launch a program that automatically places relevant advertising on blogs and other Web pages, treading on turf currently controlled by rival Google Inc.

Yahoo, the world’s biggest Internet portal, is playing catch-up when it comes to “contextual” ads -- text ads that appear near relevant online content. The Sunnyvale, Calif.-based company plans to invite 2,000 website owners to test its new service, Yahoo Publisher Network, then expand the program by the end of the year.

The new product opens another front in the search engine wars. Google and Yahoo are already locked in heated competition in keyword advertising, which generated $3.9 billion last year, according to research firm EMarketer. Contextual ads generated only $110 million but are growing fast.

Yahoo executives said they would encourage their more than 100,000 keyword advertisers to try contextual advertising.


“It’s leveraging the same advertising network we have in place today,” said Willan Johnson, vice president and general manager of Yahoo Publisher Network.

Like Yahoo, Ask Jeeves also is launching a challenge to Google. The smaller search engine was rescued from the dot-com bust by its decision in 2002 to run ads brokered by Google. Newly emboldened after being acquired last month by Barry Diller’s IAC/InterActiveCorp, AskJeeves on Monday said it had developed its own method of placing keyword ads delivered along with search engine results.

The Ask Jeeves service, like Google’s, lets advertisers bid for placement with search engine results. They pay only when Web surfers click on the links. Ask Jeeves plans to run ads both from its own service and from Google’s.

Why risk angering Google, whose ads generated 74% of Ask Jeeves’ revenue in the first quarter? Having its own ad network means advertisers can buy their ads specifically for or other Ask Jeeves websites, and Ask Jeeves doesn’t have to split the revenue with Google.


With the financial backing of its new corporate parent, Ask Jeeves now has until the end of 2007, when its contract with Google expires, to figure out whether it can generate enough of its own revenue to eliminate its reliance on Google.

“It’s great to have IAC as our corporate parent because it means the resources are there,” said Paul Gardi, an Ask Jeeves executive who now serves as executive vice president and general manager of the new IAC Advertising Solutions group.

Microsoft Corp., which runs ads brokered by Yahoo, also is developing its own system for placing search-engine ads.

The increasing competition hasn’t slowed Google much. The company last month reported second-quarter profit that quadrupled to $343 million on revenue of $1.38 billion. It generated 46% of its revenue from ads placed on websites of its partners, including Ask Jeeves and Time Warner Inc.'s America Online.


But Google’s contextual ads program has struggled to catch on with advertisers and consumers. The company uses software to determine the content and meaning of a page. For example, a news story about golf might trigger ads for golf clubs and golfing vacations. But some advertisers complained that Google’s software matched ads with irrelevant content or placed them on inappropriate websites.

Google has solved many of its early problems, said Gary Stein, a senior analyst at Jupiter Research, demonstrating that contextual ads can help advertisers promote their brands. Now Yahoo is trying to gain lost ground.

The company still has some tweaking to do. For a short time Tuesday, a story about an Air France plane crash in Toronto was accompanied by Yahoo ads offering flights on Air France.