Yahoo Inc. says it’s poised to revolutionize online advertising after years of being outmaneuvered by Google Inc.
But the slumping Internet pioneer might not get the chance to show off the latest improvements to its advertising platform unless it can convince increasingly impatient investors that the new approach will produce a bigger payoff than Microsoft Corp.'s unsolicited offer to buy the Sunnyvale, Calif.-based company for more than $40 billion.
Hoping to gain wiggle room, Yahoo is releasing more details about its effort to become a one-stop shop for selling and distributing online display ads -- the Internet’s equivalent of billboards.
The upgrade, called Amp, won’t be available until sometime this summer, and then only on a limited basis among more than 600 newspaper publishers trying to recover some of the revenue the Internet has siphoned off.
Nevertheless, Yahoo will begin promoting Amp today with an online video demonstration of a system it promises will make it easier for advertisers to aim their messages at specific demographic groups across scores of sites.
“This is a revolutionary approach that will allow marketers and publishers to deliver a more compelling experience for consumers,” Executive Vice President Hilary Schneider said.
Those remarks echo similar boasts that Yahoo’s top two executives, Jerry Yang and Sue Decker, made at an online advertising conference in late February. At that time, the new system was still operating under the code name Apex, shorthand for Advertiser Publisher Exchange.
Amp will rely on data Yahoo collects about people’s preferences at its own website as well as other online destinations. The practice, known as “behavioral targeting,” has raised privacy concerns, but Yahoo -- like rivals using similar tracking technology -- says consumers will appreciate seeing more ads tailored to their interests.
Yahoo’s new platform will be competing against similar technology recently acquired by Google and Microsoft. Google bought DoubleClick Inc. for $3.2 billion primarily so it would have a better vehicle for selling display ads. The same objective drove Microsoft’s $6-billion purchase of AQuantive.
Amp didn’t cost Yahoo nearly as much. Besides relying on techniques developed by Yahoo’s own engineers, Amp draws on technology Yahoo picked up by buying online ad services Right Media and Blue Lithium last year for a total of $781 million.
Selling advertisers on Amp may prove easier than convincing Yahoo’s shareholders that the new platform is a better bet than selling to Microsoft, whose takeover offer was initially valued at $44.6 billion, or $31 a share.
Yahoo maintains that its franchise is worth a lot more, partly because of promising advertising ideas like Amp.
But investors have reason to doubt Yahoo’s judgment after two years of disappointing results. “They have a little bit of a credibility problem right now,” Jupiter Research analyst David Card said.
In a sign of the skepticism dogging Yahoo, Wall Street hasn’t embraced the optimistic outlook the company released last month to illustrate why its board rebuffed Microsoft’s bid.
Yahoo projected that its 2009 revenue, after subtracting ad commissions, would total $7.1 billion, up 25% from this year. The company expects its 2010 revenue to climb another 25% to $8.8 billion.
Analysts have much lower expectations, with average revenue estimates at $6.4 billion for 2009 and $7.4 billion for 2010.
Amp isn’t the first advertising upgrade Yahoo has touted as a financial catalyst. Last year, the company rolled out a ballyhooed formula called Panama designed to better display text-based ads alongside online search results.
Although most advertisers applauded Panama as an improvement over the previous system, it wasn’t enough to lift Yahoo out of the financial doldrums that have depressed its profit since 2005. The downturn opened the door for Microsoft’s bid.
Just how much longer Yahoo can fend off Microsoft remains uncertain.
On Saturday, Microsoft said that if a deal was not reached by April 26, it would launch a hostile takeover at a lower price. If Microsoft pursues that option, Yahoo’s annual shareholder meeting will be the probable forum for the showdown. Yahoo must hold the meeting by July 12, around the time Amp is slated to debut.